Dairy industry alert: new trends that could affect your business! [223rd Edition of Foodcom DAIRY Newsletter]

Hello Partners!

Welcome back to our Newsletter!

Dairy prices show little fluctuation, reflecting a balanced market with optimism for the future. Skimmed milk powder (SMP) and Gouda and Edam cheeses are maintaining stable prices due to strong demand, despite the availability of cheaper spot offers. Butter and cream prices have fallen, but future contracts show uncertainty. The whey powder market remains stable, driven by steady demand in the feed sector. In addition, efforts to reduce methane emissions in agriculture are growing, and new research on avian influenza in raw milk underscores the need for further analysis for public safety.

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

Skimmed Milk Powder

SMP for feed in bulk DAP Netherlands has experienced a slight decrease in prices, now trading around 2300-2350 EUR/MT for both spot and Q3 transactions. The feed sector continues to absorb most of the SMP output, and the current price levels suggest a well-balanced market.

Prices for food-grade SMP have dipped slightly, currently standing at 2400-2450 EUR/MT. Futures for June are trading at €2500/MT, with Q3 and Q4 futures ranging between 2550-2650 EUR/MT. This forward pricing indicates some optimism about future demand, particularly from the bakery and confectionery industries, which rely heavily on SMP as an ingredient.

Cheese

Producers of Mozzarella and Gouda are holding firm on prices, refusing to sell below 4000 EUR/MT and claiming to be sold out for Q3. However, spot loads are available through traders below that price, indicating some flexibility in the market. The strong pricing stance from producers suggests robust demand, particularly from the foodservice and retail sectors. Despite claims of being sold out, the availability of spot loads indicates that traders can still source cheese for immediate needs, albeit at slightly lower prices. Also swiss-type and Cheddar holds firm.

Fats

Butter prices have fallen, especially in Poland, where they are quoted at 6350 EUR/MT FCA. Spot lactic butter is trading at 6400-6500 EUR/MT FCA, similar to unsalted Sweet Cream butter. Prices for the third quarter are around 6650 EUR/MT, with July futures at 6550 EUR/MT. The market is showing considerable uncertainty, as reflected in the wide spread between Q3 and Q4 buying and selling prices. The reason for the decline may be cooler weather and higher availability of raw materials.

Liquids

Cream prices have eased slightly last week which can be linked to ample supply in the market. Dairy processors report good availability, which is sufficient to meet the ongoing demand from the foodservice sector and confectionery manufacturers. We are closely monitoring the market to see what happens next, as weather conditions can have a significant impact on prices.

The market for Skimmed Milk Concentrate has seen a downward trend, with prices ranging between 1750-1900 EUR/MT FCA and around 1900 EUR/MT DAP Netherlands. The decline in prices is primarily due to an increase in availability, which has outpaced the current demand. Producers report good stock levels, ensuring that supply can meet any potential uptick in demand.

Spot Milk prices have shown regional variation, increasing in Holland and northern Germany while decreasing in southern Germany. This fluctuation is attributed to weather conditions, with expectations that prices will rise again with improved weather, particularly in Italy.

Whey powders

The Sweet Whey Powder (SWP) for feed market is currently trading at 680-720 EUR/MT for spot deals, with prices at 700 EUR/MT for Q3 contracts. However, for Q4, asking prices are higher but no trading activity has been reported, indicating market caution. The stable supply and steady demand from the animal feed sector are keeping prices in check.

The Sweet Whey Concentrate market remains stable, with prices holding steady at around 300-400 EUR/MT FCA. Current production levels are sufficient to meet existing demand, which is mainly driven by the animal feed sector. No major price changes are expected in the near future, unless there are significant changes in raw material costs or changes in demand patterns.

What else?

Methane, a greenhouse gas with 80 times the heating power of CO2 in its first 20 years, has become a key target for climate action. More than 100 countries signed the Global Methane Commitment at COP26, pledging to reduce methane emissions by 30% by 2030. The United States has committed $20 billion to this goal. Although 40% of methane emissions come from agriculture, only 16 countries have reduction targets in this sector. In 2023, Danone became the first food company to set a goal to reduce methane by 30% in fresh milk production by 2030, and several other brands have joined the Dairy Methane Action Alliance, pledging to report emissions and create reduction plans.

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On June 14, researchers at the U.S. National Institute of Allergy and Infectious Diseases reported that small amounts of the infectious avian influenza virus are still present in raw milk samples even after standard pasteurization. The study, which was conducted under experimental conditions, cautions against extrapolating the safety of the U.S. milk supply. While pasteurized milk is considered safe by the FDA, the study made it clear that prolonged exposure to higher temperatures may be needed to completely remove the H5N1 virus from milk. Further studies are needed to assess the public health impact of consuming infected milk.