Dairy market forecast: do rising cream and butter prices herald a price boom? [245th Edition of DAIRY Newsletter]

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The dairy market is in flux, with key segments such as skimmed milk powder, cheese, butter and cream experiencing significant price movements. In this issue, we look at the driving forces behind rising cream prices, changes in cheese production strategies and potential price implications for the first quarter of the coming year. From rising butter prices to changing profitability dynamics across product categories, we delve into the complexities shaping today’s dairy market.

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

Milk powders

For Skimmed Milk Powder (SMP) for food contact, prices are currently at EUR 2500/MT and appear to be heading towards EUR 2600/MT. Futures for Q1 are trading in a range of €2750-2775/MT, reflecting optimism for higher demand in the coming quarter.

The SMP market for feed is on an upward trend, with Q4 prices above €2500/MT and Q1 forecast at €2550/MT. However, finding enthusiastic buyers remains a challenge, suggesting potential buyer resistance or oversupply in the market.

Cheese

The Cheese market remained relatively stable compared to last week, but solid offers were on the table, suggesting a potential upward movement. However, sourcing buyers for additional spot volumes has proved challenging, indicating that demand may not be keeping pace with availability. The disparity in payouts between cream and cheese production is encouraging some producers to reduce cheese production, which could ultimately lead to higher cheese prices if this trend continues.

Fats

Butter prices have increased and can now be bought on the spot market in the range of €8000-8250/MT for November and December. Fresh butter production is linked to cream prices, which means that the price could reach around EUR 9000/MT. Prices are also expected to approach EUR 8000/MT in the first quarter of 2025. On the other hand, February futures were quoted at €7400/MT, although there is scepticism as to whether these levels will be maintained in the near future.

Anhydrous Milk Fat (AMF) has experienced price fluctuations, with current levels ranging from €9800/MT to €10050/MT. Although there have been price declines in recent weeks, the market has stabilised. Future price movements will depend on both demand and availability of the raw material, especially as market participants are keeping a close eye on supply conditions.

Liquids

Cream prices have risen further, trading between €10500 and €11000/MT FCA, equivalent to a butter price of around €9050/MT. The continued increase in the price of cream is having a significant impact on butter, raising its trading price as well. On the spot market, butter can currently be bought in the lower range of EUR 8000-8250/MT for November and December. Fresh production is being driven by cream prices and estimates suggest that the price could reach around EUR 9000/MT. Looking ahead, Q1 prices are also expected to approach EUR 8000/MT. Meanwhile, February futures trading was recorded at €7400/MT, although there is scepticism as to whether these levels will be maintained in the near future.

Skimmed Milk Concentrate also saw prices rise, in the range of €2350 to €2400/MT, FCA Germany, while the ‘festive week’ reportedly saw prices fall below €2000/MT DAP to the Netherlands and Germany, indicating some price irregularity over the festive period. The higher end of current prices reflects increasing demand for concentrated products, especially in light of changing production strategies among processors. As more and more producers choose to focus on cream and SMC instead of cheese, prices are expected to remain stable or even increase, especially given improved payout rates.

Milk spot prices have risen further, exceeding EUR 60 per 100 kg, and corresponding payouts to farmers also continue to rise. Milk purchases remained stable, suggesting that the market is balanced and that production in the EU has passed its lowest level. Processors are increasingly competing for farmers’ milk, increasing upward pressure on raw milk prices as competition intensifies.

Whey powders

Sweet whey concentrate (SWC) remains stable in the €800-900/MT range, FCA Germany. It is worth noting that some producers are choosing to move away from a cheese and whey strategy to focus on cream and Skimmed Milk Concentrate (SMC), as the profitability of cream and SMC is currently higher. The payout for cheese/ whey production is estimated at EUR 60 per 100 kg, while cream and SMC yield at least EUR 65 per 100 kg, making the latter option more attractive to producers.

The market for Sweet Whey Powder (SWP) used in feed continues to strengthen, with prices now reaching EUR 900/MT in both Q4 and Q1. Earlier in the week, trades reached EUR 960/MT, indicating fluctuating demand and supply dynamics.

What else?

Europe

UK farmers’ unions are sounding the alarm over potential changes to dairy contracts that could significantly affect local producers. Concerns are growing as government proposals to regulate contracts could force farmers to sign less favourable contracts, which could weaken their bargaining position with large dairy processors. Farmers argue that the new rules could deprive them of financial stability, which would threaten the future of UK dairy farming in the long term.

North America

Innovation in non-animal casein production is becoming an increasingly important part of the market for dairy alternatives. New technologies are making it possible to create milk proteins using fermentation processes, which is becoming increasingly important in the context of growing demand for vegan and environmentally friendly products. Perfect Day, a leader in this field, recently unveiled new possibilities for the use of casein made without cows, opening the way to more sustainable dairy products that have the same taste and texture as traditional products.

Global

New research suggests that artificial intelligence (AI) can significantly improve safety and quality control in the dairy industry. With the help of machine learning algorithms, it is possible to monitor production processes more closely, quickly detect possible contaminants and optimise the quality of the final products. The dairy industry may soon benefit from this technology, improving its efficiency and reducing food safety risks. In the long term, it could increase consumer confidence in dairy products.