European Dairy Market: Heat Wave Drives Up Prices; Proteins Remain the Strongest Segment [Issue 308 of the Foodcom DAIRY Newsletter]

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The European dairy market entered July with a noticeably stronger short-term trend, although this shift does not affect all categories to the same extent. The main factor was the heat wave in Europe, which temporarily limited milk collection, reduced the availability of liquid products, and raised prices for cream, butter, and skim milk powder.

The price rebound itself is evident, but its sustainability remains uncertain. More broadly, milk supply remains relatively strong, and part of the current price increase appears to be more a reaction to market sentiment than a shift in demand fundamentals. Buyers in the commodity segments remain cautious, particularly where inventories and pre-secured supplies are still comfortable.

The greatest contrast is currently seen between the commodity segments and high-protein products. Butter and SMP rebounded after earlier declines due to lower availability of cream and skim milk concentrate, but the market continues to face high inventories and limited acceptance of higher price levels. At the same time, WPC80 and WPI remain in a tight, demand-driven environment, while MPC85 maintains stability supported by a broader trend of interest in protein products.

Milk Powder

The skim milk powder market has rebounded from earlier weakness. Food-grade SMP is currently quoted in the range of 2,600–2,750 EUR/MT, and the upward movement is primarily due to limited availability of skim milk concentrate (SMC) and the impact of the heat wave. However, this is not yet a sign of a clear improvement in end-user demand.

Feed-grade SMP has also moved higher, with third-quarter deliveries quoted at 2,650–2,700 EUR/MT. Trading activity remains subdued, but sellers are less willing to accept lower prices following the recent strengthening of the liquid products market.

An additional source of support was the ONIL tender, covering approximately 30,000 MT of SMP and 5,000 MT of whole milk powder for the fourth quarter of 2026 and early 2027. At the same time, another round of Algerian purchases is not expected immediately, so this demand does not create a steady short-term trade flow.

Whole milk powder (WMP) remains relatively stable and is currently quoted in the range of 3,150–3,250 EUR/MT, with European levels close to 3,150 EUR/MT. Unlike SMP, the product did not react as strongly to the recent shift in sentiment following the heat wave and continues to trade within a more moderate range. The market remains stable, but buyers are selective, and a clear short-term demand impulse is still lacking.

Cheese

The cheese market is showing a slightly stronger tone following earlier pressure, particularly evident in Gouda. Gouda on the spot market is currently quoted in the range of 2,950–3,050 EUR/MT, while third-quarter levels have returned to around 3,100–3,200 EUR/MT. More broadly, Gouda is currently trading in the range of 3,050–3,200 EUR/MT, and Edam at 3,100–3,250 EUR/MT.

Mozzarella remains relatively stable and is trading around 3,250–3,350 EUR/MT on the spot market. Cheddar curd remains within a similar range, at 3,150–3,300 EUR/MT. The market is not showing any aggressive upward movement, but the decline in milk procurement following the heatwave has improved short-term sentiment.

Slightly stronger cheese prices are expected heading into August and September. Higher spot milk prices in the Netherlands and Germany, combined with lower milk procurement following the heatwave, may support production costs and limit further downward pressure.

Buyers remain cautious, but the market sentiment is no longer as weak as it was in previous weeks. The segment is transitioning from a correction phase toward stabilization, and the future direction will depend on how quickly milk supplies return to normal following the period of high temperatures.

Fats

Butter has moved higher after earlier lows. Current trades are mainly concentrated in the 3,700–3,800 EUR/MT range, with broader indications for the third quarter reaching 3,900–3,950 EUR/MT. The market was supported by a heat wave, limited cream availability, and the closing of short positions amid a calm summer trading environment.

However, the rebound still appears to be short-term and driven mainly by sentiment. Cream prices have risen significantly, making it difficult to maintain lower offers for butter, but the broader market structure has not changed fundamentally.

Inventories remain high, and many buyers are already well-hedged for 2026. This limits stronger forward demand, especially since the market still holds older batches of butter. Products with longer storage periods may be traded at a discount, as sellers manage their inventory positions and the risk associated with expiration dates.

If cream availability returns to normal after the heat wave, butter may lose some of its current support. The current rally is therefore significant for the short-term market outlook, but does not yet signal a sustained trend reversal.

Liquids

The liquid markets are currently one of the main sources of short-term support for dairy commodity prices. Cream prices rose sharply, rising from around 4,100 EUR/MT at the start of the week to levels as high as 4,400 EUR/MT, with this increase driven by lower milk procurement and disruptions caused by the heat wave.

Prices for skim milk concentrate (SMC) rose even more sharply, particularly in Germany and France. Prices in Germany are mainly ranging between 2,200 and 2,500 EUR/MT, while in France they are estimated to be closer to 2,200–2,300 EUR/MT. This has had a direct impact on skim milk powder (SMP) prices, as the reduced availability of skim milk concentrate makes aggressive offers for milk powder less attractive.

Spot market milk prices in the Netherlands and Germany are also rising, as the market reacts to lower milk collection volumes and poorer milk quality due to the heatwave. This marks a clear departure from the previously observed situation, in which spot market milk prices were very low.

Whey concentrate prices are also rising and currently stand at around 1,300–1,400 EUR/MT FCA. Demand from WPC80 producers continues to support liquid whey prices, keeping the whey market strongly linked to the high-protein products market rather than solely to fundamentals related to dry whey.

Whey and Proteins

The whey powder (SWP) market is stabilizing after earlier downward pressure. Food-grade SWP remains in the range of 1,600–1,700 EUR/MT, while feed-grade material has weakened to around 1,350–1,400 EUR/MT for July.

The European SWP market appears to be approaching a support level, though the typical summer slowdown is limiting the potential for a stronger rebound. Many buyers are well-hedged, so new purchasing activity remains cautious. At the same time, producers are not exerting much pressure for further price cuts, especially given the continued strength of whey concentrate.

The situation is quite different in the high-protein dairy ingredients segment, which remains the strongest part of the market. WPC80 continues to trade at very high levels, with European quotes ranging from 26,500 to 27,500 EUR/MT. Availability remains very limited, and the return of some suppliers to the spot market is not enough to provide any real relief to the supply situation.

WPI also remains strong, with European levels around 31,000–31,500 EUR/MT. Demand remains solid, and supply continues to be limited. Buyers are showing some caution at current prices, but this has not yet translated into an actual price correction.

MPC85 remains stable in the range of 11,000–11,500 EUR/MT, benefiting from broader demand for high-protein products. The product is supported by reformulation trends and the search for alternatives to expensive and hard-to-obtain whey proteins. However, the current supply picture points more toward stability than toward the strong supply pressure seen in WPC80 and WPI.

Whey permeate remains stable in Europe at around 950–970 EUR/MT, while the U.S. market is trending higher. Lactose has weakened slightly and is trading around 1,500 EUR/MT. In Europe, demand continues to be driven primarily by standardization, whereas limited spot availability is more clearly evident in the United States. Overall, proteins remain the strongest segment of the dairy market, while whey derivatives with lower protein content are operating in a more balanced and selective environment.