Got milk? The 2024-25 climate shift isn’t El Niño-it’s La Niña to neutral, reshaping global dairy with surprise winners and brutal challenges.

EXECUTIVE SUMMARY: The global dairy sector faced a climate curveball in 2024-2025 as a La Niña-to-neutral transition-not El Niño-drove erratic weather, reshaping production and markets. New Zealand saw record milk prices but shrinking herds, while Argentina defied expectations with a 15.9% production surge. Brazil grappled with regional droughts and floods, and India battled heat stress despite La Niña’s typical cooling effects. Trade tensions redirected China’s imports, and fat-based dairy commodities outperformed proteins. Governments rolled out conflicting policies, from Argentina’s export duty suspensions to the EU’s stricter organic rules. The takeaway? Climate adaptation and tech-driven resilience are now non-negotiable for survival.

KEY TAKEAWAYS:

• Climate reality check: La Niña/neutral conditions-not El Niño-dictated 2024-25 weather, upending traditional regional patterns.
• Regional whiplash: Argentina’s output soared (+15.9%), NZ prices hit records amid herd declines, and India’s heat stress persisted despite La Niña.
• Market shakeup: Fat-based products (butter) surged, China’s trade wars blocked U.S. whey, and futures markets bet on supply tightness.
• Policy paradox: Argentina slashed export taxes; the EU tightened organic rules, contradicting claims of deregulation.
• Adapt or die: Heat mitigation tech, AI herd management, and water innovation separated thriving farms from strugglers.

Let’s face it – we’ve all got it wrong about El Niño. The global dairy sector isn’t wrestling with El Niño as many have claimed – we’re navigating the aftermath of a brief La Niña period that shifted to ENSO-neutral conditions in March 2025. This distinction isn’t just meteorological trivia – it fundamentally changes how we should interpret weather patterns affecting your milk check.

NOAA confirms ENSO-neutral conditions developed in March 2025 will likely persist through summer, with a greater than 50% chance of continuation through October. This follows a short-lived La Niña event that created dramatically different production conditions across key dairy regions – from Argentina’s surprising 15.9% production surge to ongoing heat stress in India and volatile milk volumes in New Zealand.

Why does getting the climate diagnosis right matter so much? Because La Niña typically brings exactly the opposite weather patterns of El Niño – drier conditions to Argentina and Brazil’s south while worsening drought in Brazil’s northeast. Knowing which climate pattern, you’re facing could save you thousands when making breeding, feeding, or investment decisions.

New Zealand: Price Strength Masks Production Headwinds

Remember when everyone said Fonterra slashed its milk price forecast? They did the opposite. Fonterra significantly raised its farmgate milk price forecast to NZD 9.70-10.30 per kgMS (midpoint $10.00) by March 2025 – a substantial jump from the season’s opening forecast of $7.25-$8.75 in May 2024.

Despite these strong prices, production keeps facing serious challenges. The USDA forecasts a modest 0.8% decline for the 2025 market year, pointing to shrinking herd numbers, stubbornly high on-farm inflation, and crushing debt servicing costs.

Fonterra’s collections tell a nuanced story – running ahead year-on-year until February 2025, when monthly volumes dropped 2.3% from previous year levels. They blamed drier weather conditions across most regions, a typical La Niña impact many incorrectly attributed to El Niño.

Costs Keep Squeezing Farm Margins

Haven’t we noticed how input costs refuse to return to pre-pandemic levels? DairyNZ data shows breakeven milk price hovering stubbornly around $8.54/kgMS for the 2024/25 season – creating an economic vise that particularly crushes smaller operations.

While inflation has slowed from the terrifying 8%+ rates of 2022/23, the cumulative damage leaves costs structurally about 20% higher than pre-pandemic levels. Finance costs have exploded and remain painfully high, while fertilizer costs have eased yearly but far exceed historical averages.

Insurance premiums now inflate faster than other primary inputs, according to MPI reporting. Do NZ farmers remain cautious about significant investments despite improved milk prices?

Argentina’s Stunning Recovery Proves the Experts Wrong

Here’s where the narrative falls apart – Argentina isn’t suffering declining production. Official data from the Subsecretaría de Lechería, OCLA, and DNL shows milk production surged an eye-popping 15.9% in March 2025 compared to March 2024, with Q1 2025 volumes jumping approximately 10% year-on-year.

This remarkable comeback follows nearly 18 months of decline, with growth resuming in late 2024. November 2024 marked the first month of growth (+1.5%), followed by a 4.4% increase in December 2024 before accelerating through early 2025. Can you remember the last time we saw this sustained recovery in a major dairy exporting region?

The recovery stems from “favorable climatic conditions” and improved profitability margins, which reached 3.8% by February 2025 – the highest level since 2019. Government support, including suspending export duties on dairy products through June 2025, has dramatically boosted competitiveness.

Brazil: Regional Weather Challenges Create Winners and Losers

Brazil faces the classic La Niña dipole pattern – drier conditions hammer southern states (including the major dairy region Rio Grande do Sul) while excessive rainfall swamps northern parts. Yet despite these regional challenges, the production outlook remains cautiously optimistic.

USDA projects modest growth for Brazil’s milk production in 2025, forecasting a 1.6% increase to 25.4 million metric tons. This expected growth comes from improving prices, slower input cost inflation, and significant technology investments.

High production costs continue to plague Brazilian producers, particularly for energy, feed, fertilizers, and transport. Don’t you wonder how Brazilian farmers grow production while facing climate extremes and economic pressures? Their resilience offers lessons for producers worldwide.

India: Heat Persists Despite La Niña Conditions

India, the world’s largest milk producer, can’t catch a break from heat stress that hammers animal productivity, especially in key regions like Uttar Pradesh, Maharashtra, and Andhra Pradesh. What’s particularly troubling? This heat persisted during La Niña conditions, which typically bring cooling to India.

Despite these challenges, national production figures show remarkable resilience. Total milk production reached 239.3 million metric tons in 2023-24, maintaining India’s strong growth trajectory. Per capita milk availability increased to 471 grams/day in 2023-24, representing a 19.5% rise since 2018-19.

Let’s face it – the persistence of severe heat during global La Niña conditions signals something deeply concerning. Global warming trends increasingly override traditional ENSO weather patterns, creating unprecedented challenges for the world’s largest dairy herd. How can Indian producers adapt when the climate rulebook itself is being rewritten?

Global Markets: China’s Moves to Reshape Trade Flows

China’s dairy import patterns continue to reshape global trade, catching many analysts flat-footed. After several years of declining imports, 2025 forecasts show a modest recovery driven not by strengthening demand but by contracting domestic production.

Chinese milk production began declining in 2024 and will likely fall another 1.5% to 2.6% in 2025, creating renewed import needs. But here’s the kicker – trade policy, not weather disruptions, is driving the most significant sourcing shifts.

Sky-high retaliatory tariffs on US dairy products (reaching a staggering 135-150% on whey) have effectively locked American suppliers out of the Chinese market. Meanwhile, New Zealand benefits from full duty-free access under a bilateral trade agreement upgrade effective January 2024, helping them maintain their dominant 46% market share in early 2025. Isn’t it ironic that politics, not weather, might ultimately determine who sells milk to the world’s largest dairy importer?

Dairy Commodity Prices Show Surprising Divergence

Global Dairy Trade (GDT) auctions demonstrate significant price volatility through early 2025. The overall GDT Price Index rose 1.6% by mid-April, with Whole Milk Powder prices reaching USD 4,171/MT – substantially higher than earlier reports suggested.

Fat-based products generally showed consistent strength, with butter prices surging in early 2025 auctions (+2.6% January, +2.2% February), driven by strong retail demand and potentially lower seasonal output from Oceania.

This divergence in price trends between fat-based products (butter/AMF) and protein/solids-based products (SMP/whey) creates necessary signals for processors and farmers. Given this market signal, should you be selecting bulls for higher fat components? The differential value suggests rethinking breeding strategies.

Futures Markets Signal Heightened Uncertainty

The heightened market volatility has driven record trading volumes in dairy futures markets. The NZX Dairy Derivatives market reported an all-time high in daily, monthly, and quarterly trading during Q1 2025, reflecting urgent hedging needs across the supply chain.

A notable disconnect has emerged between futures prices and physical market signals. Despite bearish USDA price forecast revisions and weakness in markets like whey, CME Class III milk futures maintained relatively strong levels in March-April 2025, trading significantly above official price projections.

This divergence suggests future market participants see more significant supply constraints ahead of time or expect stronger demand recovery than current data indicates. When did we last see such a pronounced disconnect between futures markets and fundamental indicators? It highlights the extraordinary uncertainty permeating the dairy sector.

Adaptation Strategies Are No Longer Optional

As climate variability intensifies, investments in adaptive technologies have moved from nice-to-have too essential. Heat stress mitigation systems (high-velocity fans, sprinkler systems, improved barn ventilation) now show rapid returns, with some solutions delivering 18-month ROI. Can you afford not to make these investments when extreme weather becomes the new normal?

Water management innovations address both scarcity and excess challenges. Forward-thinking producers implement water recycling systems, improve field drainage technologies, and construct farm ponds to enhance resilience against drought and flooding.

Feed strategy diversification reduces vulnerability to climate-sensitive crops. Technology-enabled precision agriculture allows for data-driven ration management, while research into climate-smart forages and specific feed additives to alleviate heat stress symptoms gains momentum.

Technology Drives Efficiency When Margins Tighten

Artificial intelligence platforms are transforming how we manage dairy herds. Solutions like Connecterra’s Copilot provide advanced analytics that identify health or production patterns and enable early intervention for potential problems days before you notice visual symptoms.

Automation technologies, including robotic milking systems and feeding equipment, help address labor challenges while potentially improving animal welfare. Integrating AI and automation isn’t just fancy tech – it’s becoming necessary for survival.

Enhanced data visibility across the entire supply chain improves resilience. Technology platforms centralizing information from disparate sources create real-time monitoring capabilities for inventory, logistics, and demand shifts, allowing more proactive responses to disruptions. Don’t you wish you had this level of visibility during the pandemic?

The Industry Faces Structural Evolution

Farm consolidation accelerates in several key dairy regions. The European Union saw Germany’s dairy farm numbers fall below 50,000 for the first time in late 2024, continuing a decade-long decline driven by economic pressures, volatile prices, and regulatory compliance costs.

We see a similar trend in Brazil, where forecasts anticipate fewer total dairy farms but increasing milk production. This indicates growth from larger, technologically advanced operations with more substantial profit potential.

This structural shift toward fewer, larger farms in Western dairy regions reflects intense economic and regulatory pressures. Meanwhile, India’s sector remains characterized by millions of smallholders supported by the cooperative movement, presenting a contrasting development model. Which approach will prove more resilient in increasing climate and market volatility?

The Bottom Line: Building Resilience Is Your Competitive Edge

The global dairy sector faces structural uncertainty from climate change, market volatility, and evolving policy landscapes. Success will increasingly depend on your ability to innovate, diversify, and adapt toward more resilient production systems.

The current ENSO-neutral phase may provide a reprieve from extreme patterns, but let’s face it – long-term planning must account for growing climate variability. Investments in climate intelligence, cost management, technology adoption, and strategic flexibility will determine which producers thrive in this dynamic environment.

For dairy farmers worldwide, building resilience now isn’t just about weathering the immediate cycle – it’s about positioning for competitive advantage in an industry fundamentally transformed by climate and market forces. Those who recognize this shift as soon as possible will gain the most as these trends accelerate. Shouldn’t you be among them?

Learn more:

• Climate-Proofing Your Dairy: Winning Strategies for Unpredictable Seasons
  Actionable solutions for heat stress, flood resilience, and USDA funding opportunities to future-proof operations against extreme weather.
• New Zealand Milk Production Decline Forecasted: Impact of El Niño and Economic Challenges
  Deep dive into how climate patterns and rising costs are squeezing the world’s largest dairy exporter – with lessons for global markets.
• New Zealand Dairy Boom: Record Production Meets Sky-High Prices
  Surprising 2025 turnaround story analyzing how improved weather and strategic investments defied earlier gloomy forecasts.

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