Cheese prices are steady, Butter going bonkers, and USDA’s big move! [227th Edition of Foodcom DAIRY Newsletter]

Hello Partners!

Welcome back to our Newsletter!

The global dairy market is seeing significant shifts, with European Skimmed Milk Powder (SMP) prices dropping by 5%, while cheese prices like Gouda and Edam remain stable. Butter prices are rising due to adverse weather and increased raw material costs. In Australia, dairy farmers face financial stress from reduced local production and falling farmgate prices, prompting Fonterra to exit the market. Meanwhile, the USDA’s proposed updates to the Federal Milk Marketing Orders in the U.S. aim to modernize dairy pricing mechanisms, reflecting ongoing changes in the industry.

Let’s take a look at what else is happening in the dairy market!

Skimmed Milk Powder

Current prices for Skimmed Milk Powder (SMP) in Europe range from 2320 to 2450 EUR/MT, depending on brand and delivery period. Markets in Europe have recently experienced around 5% decline in SMP prices, contributing to increased availability of the product on the market as a result of uncertain expectations for future demand. Despite the price decline, buyer activity was mainly observed in Southeast Asia and North Africa, while the Middle East and China were less active in the market. Prices may be influenced by global events, such as the recent ONIL auctions, where large volumes were purchased from Belarus at prices below global levels, forcing EU producers to lower their prices.

Cheeses

Prices for cheese on the European market currently vary depending on the type of cheese. Gouda is currently priced at around 3900 EUR/MT, indicating price stability. Mozzarella, which enjoys stable demand, is priced at around 4000-4050 EUR/MT. Cagliata also maintains stable prices, similar to Mozzarella. In addition, Cheddar is priced at a similar level to last week, indicating stability in the market for this type of cheese. These prices reflect current market dynamics and can be helpful in planning purchases and sales in the cheese market.

Fats

Butter prices in Europe have increased by approximately 150-200 EUR per ton. This rise over the past week is mainly due to adverse weather conditions and higher raw material costs, particularly cream. This price hike affects both lactic and whey butter, reflecting a significant impact across the market.

Similarly, prices for Anhydrous Milk Fat (AMF) and Butter Oil have also seen a slight increase.

Liquids

Currently, Cream prices in Europe are notably high, especially in Germany where they’ve reached up to 8200 EUR/MT. This increase is driven by higher demand for cream and limited supply. Additionally, there is less milk available, contributing to the price rise. Meanwhile, the price levels for Skimmed Milk Concentrate have remained similar to those of last week, indicating a balanced market.

Raw Milk prices have risen compared to last week. The increase is primarily due to a reduced supply.

Whey powders

Sweet Whey Powder (SWP) prices in Europe are around 670-700 EUR/MT, indicating a slight decline from earlier in the month. It is noteworthy that despite challenges with exports, prices in Europe are higher than in the United States, which may affect competitiveness in the global market. The SWP market remains stable with good product availability.

What else?

Australian dairy farmers face severe financial stress as major processors like Fonterra Australia, Saputo, and Bega have slashed farmgate milk prices by 15%. This cutback arrives amidst a significant decline in local milk production, which is at a 30-year low, and escalating competition from dairy imports. These challenges, along with closures of 10 dairy processing facilities in the past 18 months, have raised concerns about the sustainability of the industry. In response to these pressures, Fonterra plans to exit the Australian market, selling major brands to focus on its ingredients business, reflecting a broader shift in global dairy industry dynamics.

The USDA has released a Recommended Decision to modernize the Federal Milk Marketing Orders (FMMO), marking a significant update in dairy pricing mechanisms. The recommendations include adjustments to the ‘make allowance’—increasing costs for processing milk into products like butter and cheese, and proposing a return to the ‘higher-of’ pricing strategy for Class I beverage milk, which was removed in the 2018 Farm Bill. The decision, which stemmed from the longest dairy hearing in history spanning 49 days and analyzing over 12,000 pages of testimony, also suggests updates to milk composition factors and differential pricing by county. Stakeholders now have 60 days to comment, with a final decision expected by mid-November, followed by a producer referendum. If approved, these changes would take effect in mid-2025, except for milk composition adjustments which would be delayed by 12 months.