FMD spreads in Europe, China’s production collapses, and tariff wars explode. Is your dairy operation prepared for the perfect storm of 2025?
EXECUTIVE SUMMARY: The global dairy industry faces an unprecedented convergence of threats in 2025 that will fundamentally reshape the market landscape and eliminate unprepared producers. European foot-and-mouth disease outbreaks in both Germany and Hungary have disrupted export capabilities. At the same time, China’s domestic milk production is projected to plummet by 2.6%, creating a high-stakes competition for import market share. Meanwhile, escalating trade tensions between the US and Canada—with threatened 250% tariffs on dairy products—risk disrupting $1.14 billion in established export relationships. These challenges, combined with extreme price volatility (dairy prices outpacing nearly all other agricultural commodities), create extinction-level risks for traditional operations and strategic opportunities for producers who implement the four critical survival strategies outlined in the article.
KEY TAKEAWAYS
- Disease Outbreak Risk: Recent FMD cases in Europe demonstrate how quickly disease can spread and devastate export markets, with previous outbreaks causing billions in economic damage.
- China’s Market Transformation: The projected 2.6% decline in Chinese production with 15% lower farmgate prices creates opportunity and intense competition among exporters.
- Trade War Vulnerability: The threatened 250% US tariff on Canadian dairy illustrates how quickly political forces can disrupt established trade relationships worth billions.
- Survival Requires Four Key Strategies: To navigate the volatile landscape ahead, forward-thinking producers must implement disease contingency planning, trade war resilience measures, product mix flexibility, and aggressive input cost hedging.
- Market Volatility Creates Opportunity: While many producers will exit the industry, those who adapt through strategic innovation can thrive amid the market disruption.
In March 2025, the global dairy industry stands at a critical crossroads, facing a convergence of threats that demand immediate attention from producers worldwide.
While mainstream dairy publications cautiously report on “market adjustments,” The Bullvine is sounding the alarm: the combination of foot-and-mouth disease confirmed in Hungary, unprecedented tariff escalation between the US and Canada, volatile commodity markets, and China’s collapsing domestic production is creating extinction-level risk for dairy operations still operating with outdated mindsets.
The facts are clear—producers who don’t radically adapt to these new realities may struggle to survive in an increasingly hostile market environment.
FMD THREAT: EUROPE’S TICKING TIME BOMB THREATENS GLOBAL EXPORTS
European FMD Outbreak Map showing Hungary-Slovakia border case with quarantine zones
The confirmation of foot-and-mouth disease on a dairy farm along the Hungary-Slovakia border in March 2025 represents a significant threat to European dairy stability.
While early viral sequencing suggests this outbreak isn’t connected to previous cases, the emergence of FMD in the heart of European dairy production should terrify anyone with a stake in the industry. Hungary and Slovakia represent just 1.6% of EU27+UK production, but the implications stretch beyond these borders.
Mainstream analysts won’t tell you how unprepared Europe’s disease management infrastructure is for managing this outbreak amid current trade tensions. Hungary has lost its FMD-free status, significantly impacting its ability to export animals, meat, and dairy products to specific markets.
“Exports of meat, dairy products, hides, and other animal-based goods are now ‘hardly possible.’ Germany’s loss of FMD-free status under WOAH standards means that veterinary certificates required for exports to non-EU countries cannot be issued.” – German Federal Ministry of Food and Agriculture
With the European Union forecasting a 0.5% increase in milk deliveries for 2025, this growth depends entirely on “effective disease outbreak management” – yet the evidence suggests containment challenges remain substantial.
THE DEVASTATING ECONOMIC IMPACT OF FMD OUTBREAKS
The financial consequences of FMD outbreaks are staggering. The 2001 UK outbreak resulted in the culling of 6 million animals and cost the British economy an estimated £8 billion ($10.2 billion). Export losses alone accounted for £3.1 billion ($4 billion) as 95 countries imposed import restrictions on British livestock products, according to the UK Department for Environment, Food and Rural Affairs.
More recently, the 2010-2011 South Korean FMD outbreak led to:
- 33% of the national swine herd was destroyed
- Dairy exports were halted for 12 months
- Over $2.8 billion in direct losses
- Approximately $1.9 billion in indirect economic damage
The complacency surrounding this outbreak is staggering. Every dairy producer worldwide should be asking:
- If FMD can suddenly appear in Hungary, where will it surface next?
- What happens to global dairy markets if a significant producing region experiences an outbreak?
The economic consequences would be catastrophic, yet few producers have contingency plans.
SPREADING DISASTER: FMD OUTBREAKS CROSSING BORDERS
“Germany’s agricultural sector is grappling with the confirmation of its first foot-and-mouth disease outbreak in nearly 40 years. The January 2025 outbreak detected in a herd of water buffalo near Berlin prompted swift containment measures and severe restrictions on Germany’s meat and dairy exports outside the European Union.” – OIE World Organisation for Animal Health.
History provides a stark warning about FMD’s devastating potential. In 2022, South Africa battled 56 outbreak cases across five provinces (Free State, KwaZulu-Natal, Limpopo, North West, and Gauteng) caused by illegal movements of animals out of FMD-controlled zones.
Despite stringent quarantine measures and movement restrictions, the country struggled to regain its FMD-free status, which it lost in January 2019.
Most concerning was how quickly the disease spread across regions. The South African outbreaks involved multiple virus serotypes, with the SAT 3 virus in Limpopo spread to three additional provinces and a separate SAT 2 strain in KwaZulu Natal.
This cross-regional transmission occurred despite government warnings about illegal animal movements, demonstrating how challenging containment becomes once FMD gains a foothold.
CHINA’S DAIRY COLLAPSE: 2.6% PRODUCTION PLUNGE RESHAPES GLOBAL MARKETS
Chart showing China’s dairy production decline of 2.6% for 2025
While dairy analysts focus on modest growth projections, they’re missing the seismic shift occurring in the industry’s largest growth market. According to Rabobank’s latest forecast, China’s domestic milk production is projected to plummet by a staggering 2.6% in 2025.
This collapse in domestic production is driven by low prices, with farmgate milk prices 15% lower year-over-year in February, forcing producers to abandon the industry altogether – a cautionary tale for dairy farmers everywhere about how quickly market conditions can deteriorate.
President Xi’s rare meeting with dairy industry executives suggests potential stimulus measures may be coming. Still, the immediate reality is apparent: China’s production collapse will create a roughly 2% increase in dairy imports as demand shows signs of partial recovery.
This creates high-stakes competition among exporting nations for access to this critical market. American producers who assume they’ll automatically benefit from this import growth are setting themselves up for failure, especially with European exporters increasingly desperate to offset potential market losses from disease-related trade restrictions.
Only producers who strategically position themselves to meet China’s specific quality and pricing requirements will capture this growth opportunity. Everyone else will be left fighting for scraps in increasingly saturated domestic markets.
TRADE WAR INSANITY: TRUMP’S 250% CANADIAN DAIRY TARIFF THREATENS $1.14B US EXPORTS
The escalating trade war between the United States and Canada has reached absurd new heights with Trump’s March 7th threat to impose a staggering 250% tariff on Canadian dairy products.
This comes after a dizzying sequence of tariff actions that began on February 1st when Trump signed an executive order implementing 25% tariffs on Canadian imports, which officially commenced on March 4th after a brief postponement.
What makes this threat particularly bizarre is that Canada exported just $278 million in dairy and egg products to the U.S. in 2023 – a minuscule amount compared to the $1.14 billion in dairy that the US exported to Canada under the CUSMA/USMCA agreement, according to USDA Foreign Agricultural Service data.
Canadian exports to the US consist primarily of premium Quebec cheeses and specialty products, representing a tiny fraction of the $17.4 billion Canadian dairy industry.
The most critical fact being overlooked is that these tariffs won’t be paid by Canada—they’ll be paid by American importers and ultimately passed on to American consumers, creating inflationary pressure and potentially limiting access to specialty products.
This is pure economic self-sabotage masquerading as tough negotiation. American dairy producers who cheered these moves will soon discover they’ve shot themselves in the foot, mainly if Canada implements reciprocal measures targeting the $1.14 billion in U.S. dairy exports.
PRICE ROLLERCOASTER: DAIRY VOLATILITY OUTPACES ALL AGRICULTURAL SECTORS
The dairy price landscape has become virtually unrecognizable compared to historical patterns. The latest FAO Dairy Price Index jumped 4% to 148.7 in February 2025, reaching its highest level since October 2022.
As shown in the table below, dairy’s increase outpaced nearly all other major agricultural commodities except sugar, highlighting the exceptional volatility dairy producers must navigate compared to other agricultural sectors.
| Commodity Price Index | Latest (Feb 2025) | Previous Month | Change |
| Dairy Price Index | 148.70 | 143.00 | +4.0% |
| FAO Food Price Index | 127.10 | 125.10 | +1.6% |
| Cereals Price Index | 112.60 | 111.80 | +0.7% |
| Meat Price Index | 118.00 | 118.00 | 0.0% |
| Oils Price Index | 156.00 | 153.00 | +2.0% |
| Sugar Price Index | 118.50 | 111.20 | +6.6% |
Particularly concerning is how different dairy commodities are moving in opposite directions simultaneously.
While EU butter prices have followed what market analysts describe as a “two steps down, one step up” pattern since January, gradually declining from €7,200 to around €6,800, European cheese markets have maintained relative stability.
Meanwhile, CME spot non-fat dry milk prices have stabilized around $1.16 per pound ($2,550 per metric ton), positioning U.S. exports competitively against European alternatives, according to USDA Dairy Market News.
This divergence creates a minefield for producers trying to optimize their product mix, with potentially catastrophic consequences for those who bet on the wrong commodity trends.
“We’re forecasting a modest 0.8% growth in the Big 7 dairy export regions for 2025, with slower growth (0.5%) in Q1 and slightly higher growth (0.9%) in the second half,” explains Michael Harvey, Senior Analyst at Rabobank. “But these averages mask extreme regional variations that create threats and opportunities.”
SURVIVAL BLUEPRINT: FOUR CRITICAL STRATEGIES TO STAY AFLOAT IN 2025
The convergence of disease threats, China’s production collapse, trade war escalation, and extreme price volatility create an environment where only the most adaptive producers will survive. Those continuing with business-as-usual approaches are effectively gambling with their operations’ futures.
1. DISEASE OUTBREAK CONTINGENCY PLANNING
No longer optional. Every operation should establish protocols for responding if foot-and-mouth or other reportable diseases appear in their region.
This includes identifying alternative revenue streams if export markets suddenly close and ensuring maximum biosecurity measures are already in place. Waiting until an outbreak occurs in your area guarantees financial devastation.
According to Dr. James Thompson, a veterinary epidemiologist at Colorado State University, “Well-prepared operations typically spend 0.5-1% of annual revenue on robust biosecurity measures, but these investments can preserve 100% of revenue if disease strikes nearby facilities.”
2. TRADE WAR RESILIENCE MEASURES
With Trump threatening to escalate tariffs on multiple fronts, producers must understand their vulnerability to direct tariffs and the secondary effects on input costs.
Cheese exports to Mexico jumped 30% year-over-year in 2024, while China accounted for 42% of US whey exports. According to U.S. Dairy Export Council data, these trade relationships are now at risk, requiring immediate contingency planning.
3. PRODUCT MIX FLEXIBILITY DEVELOPMENT
With divergent price trends across different dairy commodities, the ability to rapidly shift production focus has never been more valuable.
Even at a high cost, investing in this flexibility now may be the difference between prosperity and bankruptcy within 18 months.
4. AGGRESSIVE INPUT COST HEDGING
With increased production forecast for the second half of 2025, producers who fail to lock in feed and energy costs will be squeezed between rising input expenses and prices pressured by increasing global supply.
“The producers surviving in this environment are locking in margins rather than trying to time the market,” notes Emma Higgins, Senior Analyst at Rabobank. “They’re using risk management tools to create certainty in an increasingly uncertain market.”
THE STARK REALITY: ADAPT OR PERISH IN DAIRY’S NEW WORLD ORDER
The dairy industry has entered a new era with unprecedented risks, but so are the opportunities for those prepared to capitalize on market disruptions.
While some analysts predict 2025 will be a “sustainable growth” year with “favorable conditions,” this optimistic forecast masks the extreme volatility and regional disparities that will define the industry landscape.
The truth is that global dairy is experiencing the early stages of a massive restructuring. Operations tied to outdated business models will join the growing ranks of producers exiting the industry, as we’re already witnessing in China.
Those who recognize these challenges as innovation opportunities will survive and potentially thrive amid the chaos.
The foot-and-mouth disease outbreaks in Germany and Hungary should serve as a wake-up call to the entire industry. They reveal the fragility of our global dairy system and the devastating speed with which market conditions can change.
The clock is ticking, and the time for half-measures and cautious adjustments has passed. Based on a clear-eyed assessment of these rapidly evolving risks, Bold action is the only path forward for dairy producers who intend to remain in business beyond 2025.
LEARN MORE:
- The Potential $6 Billion Loss for the U.S. Dairy Industry
- GLOBAL DAIRY MARKETS ROCKED: US-China-Canada Tariff War Sends Shockwaves Worldwide
- Dairy Industry Crisis: B.C. Farmers Struggle with Rising Debts
Join the Revolution!
Join the Revolution!Join over 30,000 successful dairy professionals who rely on Bullvine Daily for their competitive edge. Delivered directly to your inbox each week, our exclusive industry insights help you make smarter decisions while saving precious hours every week. Never miss critical updates on milk production trends, breakthrough technologies, and profit-boosting strategies that top producers are already implementing. Subscribe now to transform your dairy operation’s efficiency and profitability—your future success is just one click away.
