Dairy market cracks under milk surplus and proteins hit record highs [292 Edition Foodcom DAIRY Newsletter]

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The beginning of December brings a deepening weakening in the global dairy market. Downward pressure is most evident in the fats, liquids and concentrates segment, driven by high milk supply, sharply lower cream prices and rising stocks. At the same time, the whey protein segment is in a completely different price reality. WPC 80 and WPI have reached historic highs, while at the same time availability is very limited.

The market is entering the year-end period with a clear oversupply of raw material, weakening purchasing activity and growing uncertainty regarding the first quarter of 2026. With continued strong milk production and signs of demand fatigue, price pressure in most segments remains firmly downward.

Milk powder

The skimmed milk powder market remains clearly supply-side. Food SMP is offered steadily in the EUR 2000-2050/MT FCA range, with occasional transactions reaching as high as EUR 2070/MT. However, an increasing number of market participants point to the risk of further price weakness over the festive period. Drying towers across Europe are currently operating at full capacity. Production remains high, further stimulated by very low SMC prices.

Feed SMP is showing slight weakness. Buyers are indicating interest around EUR 1975/MT, while sellers are still trying to hold levels closer to EUR 2050/MT DAP. This price difference reflects a market that is clearly moving to the buyers’ side.

The WMP (whole milk powder) segment also remains under pressure. Prices in Europe have fallen to around EUR 3 000/MT and are responding directly to the weakness in both butter and SMP. Rising production in Europe and stable supply from New Zealand are increasing availability on the spot market, while demand is limited. The fair value of SMP has already fallen to around EUR 2800-2850/MT, leaving room for further declines.

Cheese

The cheese market is starting to feel more pronounced pressure from weakening fat prices. Gouda was last traded in the EUR 2900-2950/MT FCA range, with similar levels seen for mozzarella. Cheddar has weakened slightly towards the EUR 3200/MT level.

Until recently, solid demand on the spot market supported price stability. However, growing fat surplus and exceptionally low cream prices are now starting to weigh on cheese margins. Cagliata is also heading downwards, in line with the general weakness in the dairy market. The market is signalling the possibility of further price adjustments as buying activity slows after mid-December.

Fats

The butter market remains under very strong pressure. German retailers have only secured volumes until mid-December at levels of €4200-4300/MT. In the Benelux region, transactions are taking place closer to EUR 3900-4000/MT FCA, while in Poland bids were reported to have fallen as low as EUR 3700/MT FCA.

Forward prices for Q1 continue to trend downwards, with the market increasingly discussing levels below EUR4,000/MT as a base case scenario for early 2026. The high availability of cheap cream (around EUR 4,000/MT and below over the festive period) further stimulates butter production with very low raw material costs.

The butter surplus in Europe after the first three quarters of 2025 has already grown to almost 94,000 metric tonnes and inventory pressure continues to build. Similarly weak conditions are evident in both the US and Oceania, as evidenced by the latest declines in the GDT auction.

Liquids

The liquids segment has experienced particularly sharp price falls. Cream prices fell as low as EUR 3700/MT last week before rebounding slightly towards EUR 4000-4200/MT. For the Christmas and New Year period, however, the market is already signalling levels below EUR 3500/MT.

SMC has weakened to a range of EUR 900-1050/MT, with some Christmas trades reported even below EUR 900/MT. Such low concentrate prices are further stimulating powder production and reinforcing supply pressures across the complex.

The main exception remains whey concentrate, which continues to hold very high, around EUR 900/MT FCA, directly driven by record high WPC 80 and WPI prices.

Whey powder

The whey powder market remains largely stable in price, although overall demand remains moderate. In Europe, food SWP remains in the region of EUR 1100/MT, while the feed material trades steadily at EUR 1020-1040/MT DAP NL. Prices in the USA are higher, but the market there is also not showing much upward momentum.

In sharp contrast is the high-protein whey segment, which continues to record strong increases. WPC 80 is reaching levels above EUR 13,000/MT and WPI has exceeded EUR 22,000/MT, making it one of the most expensive dairy ingredients on the market. Extremely limited availability in both Europe and the US, combined with record demand, including from functional foods and the fast-growing clear whey segment, continues to drive further price escalation.

Production is being redirected as much as possible towards protein fractions at the expense of dairy powders, keeping the market in a state of sustained tension. Availability for the first months of 2026 remains very limited and prices continue to test further historical maxima.

Whey permeate and lactose remain stable at relatively low levels, supported by strong production and stable feed demand, mainly from China. Lactose prices in Europe are broadly spread between €1,000 and €1,425/MT, depending on origin and specification.

What’s new?

Europe

Irish milk prices are set to recover in the first half of 2026, according to forecasts from industry experts, including analysts at Ornua. The Irish dairy sector has been under severe financial pressure in recent months due to falling farmgate prices, high production costs and an oversupply of milk across Europe, driven by increased production in major manufacturing countries such as Germany, France, the UK and the Netherlands. Weak global demand has further exacerbated the slowdown, but economists believe that gradual tightening of supply and a recovery in international demand should support a rebound in prices next year, giving Irish dairy farmers the opportunity for improved profitability and greater income stability.

North America

US milk production continues to grow rapidly, reaching what analysts describe as ‘critical mass’, with supply continuing to outstrip demand despite falling milk prices. Growth is mainly driven by higher yields per cow, improved feeding efficiency and farm expansion, rather than a surge in herd size. As a result, stocks of dairy products such as cheese, butter and milk powders are rising, putting strong pressure on wholesale and farmgate prices. Experts warn that if domestic consumption or export demand does not increase, continued oversupply could continue to weigh on the US dairy market and global prices in the coming months.