Brazil milk output hits record as farm prices fall
High supply and imports weigh on 2026 outlook
24 February 2026
2 minute read
By: Brazil’s milk production reached a record level in 2025, rising an estimated 7.2 per cent from 2024, according to Embrapa.
Imports also remained high. Although volumes declined 4.2% from the previous year, the trade balance still showed a deficit of about 2 billion litres in milk equivalent. Powdered milk remained the main imported product.
The combined effect was an oversupply of dairy products in the domestic market, leading to sustained declines in farmgate prices, particularly from April onward. Data from the Milk Intelligence Center at Embrapa show the average price paid to producers fell to R$1.99 per litre in December 2025, down 22.6 per cent from the previous 12 months. Retail prices for a basket of dairy products, including fluid milk, cheese, yogurt, condensed milk, powdered milk and butter, declined 3.62% over the same period.
Global supply also remains elevated entering 2026, with production in Argentina and Uruguay rising between seven and eight per cent in 2025. More moderate global growth is expected this year due to tighter margins and geopolitical uncertainty in Venezuela, Iran and Eastern Europe.
Samuel Oliveira, a researcher at Embrapa Gado de Leite, said international dairy prices remain low at the start of the year. “Bullish movements perceived in the last GDT auction should be perceived as punctual price corrections,” he said, referring to the Global Dairy Trade platform.
In Brazil, economic growth is projected at 1.8% in 2026, compared with 2.3% the previous year. An election year and continued high interest rates add uncertainty, including exchange rate volatility and the prospect of higher public spending.
Farmers continue to face pressure in the short term. High supply pushed the farmgate price to about US$0.36 per kilogram. The spot market has recently shown signs of recovery, although a stronger real could make imports more competitive in coming months.
Higher calf prices and stronger beef cattle values have provided additional income for some dairy producers. The upcoming dry season may also support milk prices.
Oliveira advised caution and planning for the year ahead. “The transformations in the sector are fast and those who do not follow them will be left behind. It is necessary to seek to increase productivity and reduce costs or add value, taking advantage of the space that Brazil still has to evolve in technological competitiveness,” he said.
Embrapa researchers said structural changes are underway in the sector, with production increasingly concentrated on larger, more capitalized farms. “We observed a structural change in milk production in Brazil, with greater concentration on large farms. These structured farms respond to the issue of profitability in a stronger way,” said Glauco Carvalho of Embrapa Gado de Leite.
The Milk Production Cost Index rose three per cent in 2025, compared with official inflation of 4.3%. According to Oliveira, “This stability in the cost of production created a certain cushioning of the negative effect of the price drop, because the terms of exchange were not so harmed.”
Stable feed prices, supported by strong corn and soybean harvests, helped limit cost increases. Carvalho noted that margins remained tight but generally positive on average for the year, although conditions worsened in the final quarter of 2025.
