India is set to strengthen its position as the world's largest milk producer in 2026, with cow's milk production forecast to rise to 105.4 million tonnes (mt) — up from 103.2 mt in 2025, according to the latest Dairy: World Markets and Trade report by the United States Department of Agriculture (USDA). The increase comes alongside a gradual expansion in the country's dairy herd, with the number of cows in milk expected to reach 62.5 million head, the highest among all countries tracked by the agency.
Domestic Consumption Drives the Market
The report estimates domestic fluid milk consumption at 93 mt in 2026, reflecting the country's continued reliance on a large domestic market to absorb rising output. India is second only to the European Union in total milk production. The USDA report largely portrays India as a domestic consumption-driven market, with rising milk production being absorbed by expanding local demand rather than international trade.
Processed Dairy Products See Steady Gains
India is also expected to register steady gains across processed dairy products. The following table summarises production and consumption forecasts for butter and non-fat dry milk:
| Product | 2025 Production | 2026 Forecast Production | 2026 Domestic Consumption |
|---|---|---|---|
| Butter | 7.19 mt | 7.44 mt | 7.39 mt |
| Non-fat dry milk | 770,000 tonnes | 790,000 tonnes | 779,000 tonnes |
India remains the world's largest butter producer by a wide margin, ahead of the EU and New Zealand, according to the USDA.
Global Dairy Trends
Globally, the dairy industry is witnessing stronger momentum in export-oriented products. The USDA expects US butter exports to surge 40 per cent in 2026, while EU butter exports are projected to rise 10 per cent as processors channel available milk towards higher-value dairy products. New Zealand is also forecast to post record milk production of 22.5 mt, supported by improved farm profitability.
- US butter exports: up 40% in 2026
- EU butter exports: up 10% in 2026
- New Zealand milk production: record 22.5 mt
India's Export Profile
Notably, despite India's growing presence in overseas dairy markets through co-operative major Amul’s international expansion, the USDA report does not discuss India’s dairy export prospects or outline any expectations for export growth. Instead, the report largely portrays India as a domestic consumption-driven market, with rising milk production being absorbed by expanding local demand rather than international trade.
Implications for Commodity Analysts
For commodity traders and analysts tracking global dairy markets, India's output growth reinforces its role as a price-setter regionally, though limited export volumes mean its direct impact on international butter and skim milk powder prices may remain muted. The focus on domestic absorption suggests that any surplus beyond local demand could eventually find its way to export markets—particularly through Amul's network—but the USDA's data does not forecast such a shift in 2026. The rise in US and EU butter exports, however, indicates tightening supply in those regions, which could support global dairy prices.
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