The French firm, which makes Activia and Actimel yogurts, said the increase would weigh on profits, but did not say if it would need to raise prices.
Danone also said it was implementing cost cuts worth 1bn euros (£850m).
Milk prices will rise in the «mid-single digits» in Europe, and even more in Latin America and Russia, the company said in its annual results.
Danone is overhauling its dairy division, where it is reducing costs and launching new products.
The firm, which also sells Evian water and Cow & Gate baby milk, said it was targeting profit growth this year of more than 5%, down from 9.3% in 2016.
British dairy farmers have protested over the effect of sharp swings in the price which they are paid for milk.
Global milk prices started rising again last year, and in December, the average UK farm gate price was 26.2p a litre, a 9% increase on the previous year.
Source: BBC
Link: http://www.bbc.com/news/business-38978964