Dairy markets split: strong performance for cheese and butter, weak for liquid products [The 301st edition of the Foodcom DAIRY Newsletter]

Welcome, Partners!

Welcome back to our newsletter!

After a brief hiatus last week, the Foodcom Dairy newsletter is back, and European dairy markets remain at high levels. Geopolitical tensions in the Middle East and rising freight costs have increased uncertainty in global trade flows, prompting buyers in many markets to prioritize supply security.

At the same time, strong export demand continues to support products such as milk powder, cheese, and butter, while the liquid products segment remains under significant pressure. Milk availability across Europe remains high, and spot milk prices in some regions are exceptionally low, highlighting the growing divergence between the liquid milk market and the stronger performance of finished dairy products.

Powdered milk

The skim milk powder market rose slightly over the week, supported by sustained export demand and competitive European prices on global markets. Food-grade SMP is currently trading in the range of approximately 2,550–2,650 EUR/MT FCA, while feed-grade material is quoted at a similar level on a DAP basis.

Part of the recent support stems from shifts in international trade dynamics. As some traditional exporters face disruptions, European suppliers are receiving more inquiries from foreign customers. At the same time, rising freight rates are becoming an important negotiating factor, which may limit further increases in the near term.

In contrast to the relatively stable milk powder market, skim milk concentrate continues to trade at significantly lower levels, typically between 450 and 550 EUR/MT. The large price gap between SMP and concentrate reflects the persistent surplus of raw milk and pressure in the liquid products segment.

Whole milk powder remains relatively stable. Production volumes are limited as many processors are focusing on higher-value cheeses, butter, and protein products, which keeps the WMP market in balance, though it is less active than the SMP segment.

Cheese

Cheese markets continue to strengthen, particularly for foil-wrapped ripened cheeses such as Gouda, Edam, and Mozzarella. Producers report growing demand from both the retail sector and exports, with some transactions already reaching levels close to 3,600 EUR/MT FCA.

Retail sales are performing particularly strongly—significant growth in consumer demand for cheese is being observed in many markets. This is encouraging producers to maintain high prices while limiting the availability of spot volumes.

At the same time, market participants are beginning to wonder how sustainable current price levels will prove to be. Rising freight costs and higher export prices may ultimately slow international demand.

An interesting contrast is also visible in the Gouda market. While foil-ripened cheeses remain expensive and hard to find, stocks of naturally ripened Gouda in the Netherlands are reportedly high, and prices can be significantly lower—around 3,250–3,350 EUR/MT.

Fats

Butter prices remain high, though the market showed some volatility during the week. Spot transactions were most frequently reported in the range of 4,700–4,900 EUR/MT, with occasional transactions exceeding these levels early in the week before prices corrected slightly.

The relationship between cream and butter prices continues to pose a challenge for processors. Current cream prices suggest that the economics of butter production are closer to around 3,700 EUR/MT, creating uncertainty regarding production margins.

Changes in the retail market may also influence the market. In Germany, retail butter prices have reportedly risen significantly—from levels corresponding to around 3,700 EUR/MT to around 4,200–4,300 EUR/MT.

For now, butter remains supported by solid demand and limited availability, though the current price structure continues to raise questions about the long-term sustainability of such levels.

Liquids

The liquid products segment remains the weakest part of the market despite higher prices for finished products. Milk supply in Europe remains high, and spot milk prices in some regions have fallen to exceptionally low levels, sometimes reported between 0.00 and 0.04 EUR/kg.

Prices for skim milk concentrate currently stand at 450–550 EUR/MT, reflecting the persistent surplus of raw milk and limited processing capacity. Whey concentrate prices remain significantly higher—around 850–1,050 EUR/MT.

The cream market saw strong growth at the start of the week, when prices temporarily reached 5,100–5,300 EUR/MT, before falling slightly to 4,950–5,100 EUR/MT.

In some regions, exceptionally low milk prices are causing part of the milk surplus to be diverted to alternative uses, such as biogas production, which illustrates the scale of the current oversupply in the liquid dairy segment.

Whey and Proteins

Whey markets remain relatively tight compared to other segments of the dairy industry. Feed-grade sweet whey powder is currently quoted at 1,300–1,400 EUR/MT DAP NL, while food-grade material remains close to 1,300 EUR/MT.

Limited drying capacity in Europe continues to impact the market. Many processors are focusing on higher-value protein products, which limits the availability of whey powder and supports concentrate prices.

Whey concentrate remains expensive, trading in the range of approximately 850–1,050 EUR/MT, reflecting strong demand and competition for raw materials for protein production.

High-protein products remain among the strongest segments of the dairy market. WPC 80 instant is currently quoted at around 18,000 EUR/MT, while whey protein isolate remains near 24,600 EUR/MT. Demand from the nutrition and specialty food markets continues to support these historically high price levels.

What else?

Oceania

Fonterra is entering a new strategic phase following the sale of its Mainland consumer business to France’s Lactalis in a deal valued at approximately NZD 4.2 billion. The transaction represents the next step in the New Zealand cooperative’s strategy to streamline its operations and focus more strongly on higher-margin areas, such as dairy ingredients and the foodservice sector, which are seen as key sources of future growth.

The sale will also allow Fonterra to return a significant portion of the proceeds—approximately NZD 3.2 billion—to its dairy farmer shareholders. At the same time, Lactalis will strengthen its position in the global consumer dairy market by expanding its brand portfolio and increasing its presence in many international markets.