Butter peaks and cream stabilises: Dairy fat market sees increases amid supply changes [238th edition of DAIRY newsletter]

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The dairy market is showing signs of strengthening in many sectors. Skimmed milk powder (SMP) is experiencing shrinking supplies, pushing prices higher. Butter prices have reached their highest levels since 2022, driven by limited cream availability and continued demand. Are the peak in cheese and butter prices behind us and what’s next?

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

Skimmed milk powder

Prices have strengthened in the last week due to dwindling stocks. Skimmed milk powder for feed is often cheaper than that for food use. SMP for feed was around €2450-2580/MT, with expectations of further strengthening in Q4 due to limited supply and increased demand.

SMP for food purposes: The market for skimmed milk powder for food contact is on an upward trajectory, with prices exceeding EUR 2650/MT last week. Futures trading and market trends suggest that prices could approach or exceed €2,700/MT as buyers look to secure supply against further production disruptions.

Cheese

Gouda and Mozzarella are showing considerable strength in the market. Gouda prices are reported to have reached around €4800-4900/MT, while Mozzarella spot prices are also rising, with some Q4 bids starting at €4700-4800/MT.

Cheddar is trading above both Gouda and Mozzarella, with recent spot prices potentially exceeding €5000/MT. The market for these cheeses remains tight, reflecting strong demand. The limited availability of Cagliata (a precursor to Mozzarella) is putting additional pressure on the cheese market, pushing prices even higher.

Fats

Butter prices have seen a significant increase over the past few weeks. This marks the highest price since October 2022 and indicates a strong market driven by limited cream availability and high demand for both block and retail butter. At the end of September, the market remains tight, with industry sources suggesting that prices could potentially reach or exceed €7800-8000/MT. Recent trends indicate that butter prices may face upward pressure due to the continued shortage of cream supplies. However, we are seeing a slight weakening of prices and butter prices are starting to slowly decline. We are also starting to receive more and more offers for butter that we did not have before.

Liquids

Last week, cream prices in Europe showed a relatively stable trend. Despite the volatile factors that usually affect the dairy market, cream prices remained at a similar level in most European countries.

Recent reports indicate that skimmed milk concentrate (SMC) prices have strengthened due to strong demand in the dairy sector. In earlier months, prices were estimated at around €2450-2550/MT on an FCA (Free Carrier) basis. Given the current market conditions characterised by limited milk supplies and increasing demand, SMC prices may experience a similar upward trend to other dairy products on the market in late September.

Milk prices have recently risen to around €60/100 KG. Despite an overall increase in EU milk supply compared to last year, the seasonal decline in milk consumption, together with factors such as poor weather, silage quality and bluetongue concerns, have led to a firming of prices. The reduction in supply suggests a strengthening of the market with potential price increases through to the end of September and beyond.

Whey powder

SWP for feed: On a wholesale basis, Dutch DAP prices for SWP feed were previously reported at around 850-900 per metric tonne. In line with recent trends, the market continues to consolidate, possibly pushing prices up to €900-920/MT. Entering Q4, market analysis suggests a likely increase, potentially approaching €925-935/MT, driven by strong demand and declining supply.

Food grade SWP: Food grade SWP typically trades at higher prices, often in the EUR 930-1050/MT range. With the current strengthening market, these prices are likely to remain stable or even increase in Q4.

What else?

United States

US farmers are calling on the government to allow the vaccination of chickens, turkeys and cows to combat avian flu, which has devastated flocks and pushed up egg prices. More than 100 million chickens and turkeys have died from the outbreak since 2022. The USDA is researching vaccines, but faces export challenges as many countries ban the import of vaccinated poultry. Migratory birds pose an ongoing threat, although fewer are becoming infected, indicating potential immunity. Despite the risks, the USDA warns that widespread vaccination is not yet possible due to barriers to international trade.

New Zealand

Waikato farming company Flint Farms Limited, along with its director Barry Flint and farm manager Gavin Flint, has been fined $305,900 for illegal discharges of dairy wastewater. The breaches took place between August 2022 and June 2023, in breach of environmental legislation and a notice of restriction. The court also ordered the farm to upgrade its wastewater discharge system to prevent further environmental damage. The fine serves as a warning to farms with inadequate wastewater management practices, highlighting the need for adequate infrastructure to ensure compliance with long-standing environmental legislation.