Butter and Cream prices soar: strong demand keeps costs high [236th Edition of Foodcom DAIRY Newsletter]

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Cheese prices, especially mozzarella, are soaring due to high demand and limited milk supply. Butter and cream prices remain stable but high, driven by strong demand and supply constraints. Whey powder prices are expected to rise as the feed industry faces increasing costs. Global factors like avian influenza in the US and new Russian regulations could further impact the market.

Let’s see what else has happened in the dairy market recently!

Skimmed milk powder

Skimmed Milk Powder (SMP) for feed is seeing prices rise to 2650 EU/MT for Q4 2024, and prices could reach 2750 EU/MT for Q1 2025, although there is no firm demand at these levels yet. The SMP market is heavily influenced by changes in milk production, with increases in production costs contributing to pressure for further price increases. Strong demand in regions such as Southeast Asia and Latin America is reducing available SMP supplies in Europe, which could influence further price changes. Producers are being forced to raise prices in response to rising production costs such as energy and feed.

Cheese

Mozzarella prices rose 5.2% to reach 4592 EUR/MT in September 2024. This is an increase of 36.1% compared to last year, showing the huge demand for the cheese, especially in Europe. Mozzarella prices are expected to rise further above 4800 EUR/MT for Q4 2024, and Gouda prices could reach as high as 5000 EUR/MT. This price increase is due not only to the growing demand for cheese, but also to the limited availability of milk and its derivatives on the European market, further driving the cheese market.

Fats

Butter prices in Europe are currently 8000-8200 EUR/MT, with 10kg blocks in Germany selling above 8450 EUR/MT FCA, mainly to small bakeries. Demand for butter is high, especially in the bakery sector, keeping prices stable. Limited milk supply, especially in regions such as the Baltics, further affects the market, where milk quality (fat and protein) remains crucial for butter production.

Liquids

The Cream market is currently stable, with prices ranging from 9850 to 9950 EUR/MT on FCA terms. Spot market supplies are above the 10,000 EUR/MT level, suggesting little change in prices from previous weeks. There is growing interest in milk fats from the food industry, particularly in ice cream and confectionery production. Growing demand for dairy fats is keeping cream prices high, especially as producers continue to face difficulties in maintaining a steady supply. Forecasts indicate the possibility of further price increases in Q4 2024, especially due to limited supply in some regions.

Skimmed Milk Concentrate is also seeing an increase in prices, which are now 2500-2600 EUR/MT on FCA terms, a significant jump from earlier weeks when prices were 2450 EUR/MT. The increase is a result of rising demand for protein products, as well as limited supply in the European market. The increases can be linked to increased production of cheeses, especially white cheeses, resulting in greater consumption of concentrated skimmed milk in food production. The limited availability of concentrated dairy products may influence further price increases in the coming months.

EU Milk prices rose to 46.8 c/kg in September 2024, up 1.2% from the previous month. In some regions, such as Italy, spot milk prices exceeded 64.5 c/kg, indicating severe shortages of the raw material in some parts of Europe. The milk market is strongly influenced by changes in production costs, especially increases in energy and feed prices, leading to further increases in raw material prices. Milk shortages in the Baltic States and production restrictions are causing producers to scramble for access to raw material, further complicating the situation.

Whey powder

Whey powder prices for feed remain at 890-900 EUR/MT, indicating market stabilization in the short term. Predictions for Q4 2024 are for an increase to 940-950 EUR/MT, and for Q1 2025 prices are expected to reach 950 EUR/MT. The whey market is feeling the impact of rising demand from the feed industry, which continues to struggle with higher raw material costs. Inventory shortages and strong competition for available supplies may further stimulate price increases in the coming months. Moreover, global changes in milk production may further strengthen the market, especially in Europe.

What else?

USA

The H5N1 avian influenza virus, which has spread to dairy cow herds in the US, poses a serious threat to the dairy industry. The virus infects cows’ udders, leading to a decline in milk production and changes in milk quality, such as altered color and viscosity. As of 2024, 191 cattle herds and 18 million birds have been infected, and there have been cases of human infections, mainly among people in contact with infected animals. Although the risk of the virus spreading to humans on a larger scale remains low for now, the situation poses a threat to public health and the dairy industry.

New Zealand

The Waitonui Group, which managed farms of 3,500 hectares and supplied milk to Fonterra, was liquidated at the request of the Internal Revenue Service. The group had failed to pay a $36.5 million debt to BNZ, despite earlier mediation. The Supreme Court declared the company insolvent. Milltrust International withdrew from managing operations in New Zealand in 2021.