Butter softens, cream slips: will prices melt further in the New Year? [249th Edition of the DAIRY Newsletter]

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As we enter the final phase of the year, the outlook for the dairy market is far from calm. From falling butter and cream prices, to surprising signs of stability in the high-protein whey market, to cautious demand for cheese, this report looks at the decisive trends shaping Q1. Seasonal increases in milk production, emerging export opportunities and unexpected price movements over the Christmas period indicate that there is more going on beneath the surface than you might think. Where are prices holding steady and where are cracks starting to appear?

Let’s take a look at the hidden dynamics driving the dairy market in the coming months. This is one not to be missed!

Milk powder

Prices for Skimmed Milk Powder (SMP) for food use are stable or slightly increasing, currently at 2500-2650 EUR/MT. Fresh SMP is in moderate demand in the EU, with recent transactions with Algeria reaching around 2500 EUR/MT FCA. Seasonal trends and an increase in milk processing are keeping supply in balance, but prices may come under pressure as Q1 progresses.

SMP prices for feed purposes have fallen to 2450-2500 EUR/MT with Q1 deliveries. Skimmed milk concentrate prices reflect this trend, fluctuating between 1900-2000 EUR/MT FCA Germany, with bids below 1900 EUR/MT observed over the Christmas/New Year period.

Cheese

Cheese markets remain under pressure. Gouda prices have fallen to 4200-4300 EUR/MT FCA, influenced by weak sentiment and falling end-user demand. Stocks are not excessive, but lower butter prices and external market factors are adding to the downward pressure on prices. Steady retail demand for Gouda provides limited support.

Mozzarella prices continue to fall rapidly, currently at 3850 EUR/MT FCA, driven by oversupply and seasonally reduced consumption. Producers are reducing production to stabilise prices, but the weak outlook suggests further declines. Cagliata prices in Europe remain stable at 4400-4550 EUR/MT, despite slight recent declines. Increased exports to Asia, particularly China, are supporting the market and may help stabilise prices in the longer term.

In contrast, Emmental prices remain relatively high at 5200 EUR/MT FCA, due to lower availability and higher demand compared to other cheeses. However, prices are expected to fall in Q1, with increased production resulting from increased milk processing….

Fats

Butter prices weakened further, with Q1 contracts settled at 6600-6800 EUR/MT; however, December deliveries are still seen at higher levels at 7300-7400 EUR/MT. The declines are due to market pressures from increased milk production during the season and falling cream prices. Producers are struggling to maintain margins, particularly in the face of rising operating and raw material costs. Steady retail demand continues to provide support to the market, limiting the pace of declines and offering some resistance to further price reductions.

The Anhydrous Milk Fat (AMF) market remains stable, although current prices have fallen slightly below the 9000-9200 EUR/MT range, with further declines expected in January. Strong export demand, particularly from the confectionery sector, has provided some protection against wider market pressures.

Liquids

Spot prices for Cream have fallen to 9300-9500 EUR/MT FCA, and trades below 9000 EUR/MT have already been observed in the Christmas week. The increase in milk production during the season is contributing to higher availability, putting further pressure on prices and leading to forecasts of a fall below 8500 EUR/MT in January.

Concentrated Skimmed Milk (SMC) remains stable at 1900-2000 EUR/MT FCA Germany, although prices fell below 1900 EUR/MT during the Christmas week. Steady demand for concentrated milk products and stable milk processing during the winter months support these price levels.

Spot Milk prices have fallen significantly, reflecting the seasonal increase in milk production in Europe. Increased supply is prompting processors to convert surplus milk into powders and cheeses, contributing to price pressure across dairy categories.

Whey powder

Whey products with high protein content, including Whey Protein Isolates (WPI) and Whey Protein Concentrates (WPC 80), continue to achieve high price premiums, with WPI at 18500-19500 EUR/MT and WPC 80 around 10800-11000 EUR/MT. Strong demand and limited availability in these premium categories keep their prices high.

Sweet whey powder (SWP) for feed purposes remains stable at 880-930 EUR/MT DAP NL with deliveries for Q4 and Q1. SWP for food purposes ranges from 930-1000 EUR/MT. Reduced cheese production has reduced the supply of whey, stabilising prices despite steady demand.

What else?

Asia

Indonesian President Prabowo Subianto’s new policy aims to increase domestic milk production by requiring the import of live dairy cows as a condition for importing dairy products. A key reason for this decision is the implementation of the free meal programme for 80 million schoolchildren, which aims to provide children with whole milk as a source of protein and nutrients. Indonesia currently produces only 16% of its milk needs, so the authorities want to reduce reliance on imports and create a self-sufficient supply system for the programme. The decision raises concerns about trade disruption, especially for New Zealand, which exports $1 billion worth of dairy products to Indonesia annually.

Europe

In the UK, the number of farmers leaving the dairy sector is starting to slow. According to AHDB data, there were around 7200 dairy farmers in the country in October 2024, a slight decrease of 30 farms since April. This compares with an annual decline of 4% in October 2023. The main reasons are pressure on margins and high slaughter cow prices, but the improvement in milk prices over the summer has slowed the rate of abandonment. Average milk production per farm increased to 1.7 million litres per year, confirming the trend towards larger but smaller farms.

In London, hundreds of UK farmers blockaded the city with a column of more than 600 tractors in protest against Labour’s new plans for a farm inheritance tax. Farmers oppose the 20 per cent tax that would apply to the transfer of farms to the next generation, claiming it is a threat to family farms. The protesters warn that if the government does not respond, similar actions will continue, underlining the slogan “Without farmers there is no food”.

The government’s Strategic Reserve Agency (RARS) has decided to sell more than 1,000 tonnes of frozen butter held in reserve. The butter is being offered in blocks of 25kg, with a minimum price of £28.38 per kilogram (excluding VAT). The main purpose of the tender is to stabilise the situation on the market, where recent months have seen a dynamic rise in prices due to the global milk shortage and higher production costs. The agency stresses that the sale of reserves is to meet demand and counteract further increases. Bids for the purchase of butter can be submitted until 19 December 2024. The decision has sparked widespread discussion among dairy experts and producers, who fear it could upset the price balance in the market.