The European dairy market under pressure from geopolitical factors and rising costs [Edition 303 of the Foodcom DAIRY Newsletter]

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European dairy markets remain highly volatile, and recent geopolitical tensions in the Middle East have added another layer of uncertainty. The initial reaction was a wave of precautionary buying, which drove prices higher. However, as the week progressed, the market corrected itself and entered a more cautious phase.

At the same time, rising energy, freight, and insurance costs continue to complicate global trade. Buyers are increasingly focusing on securing volumes rather than optimizing prices. Despite strong milk production across Europe, the market remains distinctly divided: the protein segment is tight and well-supported, while the liquid segment continues to struggle with oversupply.

Milk powder

The skim milk powder market rose again this week, with prices holding steady above 2,700 EUR/MT FCA amid limited availability of immediate deliveries. Buyers are increasingly focused on securing volumes, as offers below current levels are becoming scarce.

Feed-grade SMP is trading at similar or slightly higher levels, reaching €2,700–2,800/MT DAP FR/NL/BE, supported by the same tight supply.

The market continues to be constrained by insufficient drying capacity, as producers prioritize higher-margin products such as whey proteins. Additional pressure is caused by disruptions in global trade, which limit export availability from certain regions and tighten the global supply-demand balance.

Whole milk powder showed a weaker trend following the latest GDT tender, with prices falling due to weaker demand, particularly from North Asia. This confirms the growing divergence between the SMP and WMP markets.

Cheese

Cheese markets remain strong, with prices continuing to rise due to limited availability in the spot market and strong demand. Gouda is currently trading at around 3,650–3,700 EUR/MT FCA, while Edam is following suit at slightly lower levels.

Production across Europe is in full swing, but this has not translated into higher inventories. Most of the cheese currently available on the market is relatively young, which confirms the limited stock levels.

The key constraint is no longer milk availability, but processing capacity. As margins improve again, producers are maximizing production and avoiding spot milk sales, even though raw milk prices remain low.

Strong export activity continues to absorb volumes, keeping the European market tight and limiting availability for domestic buyers. Buyers who were previously under-hedged are increasingly returning to the market as expectations of a price correction during the peak milk production period become less certain.

Cheddar prices remain stable above 3,500 EUR/MT, with good demand and limited availability of short-term supplies.Cagliata is showing a similar trend, supported by stable demand from processors.

Fats

The butter market corrected sharply last week, with prices falling from recent highs near 4,850 EUR/MT to levels below 4,400 EUR/MT FCA. This move was primarily the result of a rapid decline in cream prices, which fell from around 5,300–5,400 EUR/MT to 4,600–4,700 EUR/MT over the course of the week.

At current cream price levels, implied returns from butter production are closer to 4,000 EUR/MT, which is putting additional pressure on the market and explains the pace of the correction.

Global signals remain mixed. Recent GDT results showed weaker butter prices, while AMF rose significantly, highlighting divergences within the fats segment and pointing to uneven demand across different regions.

With Easter approaching and the start of the fresh produce season, the market is entering a critical period. Short-term demand may provide temporary support, but increasing milk availability and improving cream supply may continue to put pressure on prices.

Overall, the market has shifted from a phase of structural shortage to a more reactive model, where the direction is now primarily driven by seasonal demand and short-term fundamentals.

Liquids

The liquid segment remains under pressure, although recent movements suggest some stabilization following earlier volatility. Cream prices fell significantly during the week before stabilizing at lower levels, in line with the weaker butter market.

Milk supply across Europe remains high, and spot milk is trading at very low prices, underscoring the continuing oversupply in the liquid segment.

Skim milk powder strengthened slightly, reaching the 800–1,000 EUR/MT range, supported by improved demand and somewhat tighter availability compared to previous weeks.

Despite these changes, the structural imbalance remains: strong demand for finished products contrasts with the persistent weakness of the liquid products market.

Whey and proteins

The whey market remains strong, supported by limited drying capacity and strong demand for protein products. Feed-grade whey powder is quoted at 1,350–1,400 EUR/MT DAP FR/NL/BE, while food-grade material costs around 1,450 EUR/MT.

Whey concentrate remains expensive—at 800–950 EUR/MT—as demand from WPC and WPI production continues to absorb available volumes.

WPC 80 prices are reported at around 17,000–18,000 EUR/MT, while whey protein isolate remains well above 23,000 EUR/MT, reflecting the continued strength of the protein segment.

Overall, the whey segment continues to be driven by proteins, and structural constraints on processing capacity are keeping the market tight despite high milk availability. Lower-value products remain relatively stable, with limited upside potential.

What else?

British dairy farmers are facing mounting losses following the collapse in milk prices

British dairy farmers are under severe financial pressure following a sharp drop in milk prices, which in some cases have fallen by as much as 40% since the end of 2025 and have dropped below production costs. This decline is mainly due to an oversupply of milk in both the domestic and global markets, exceeding demand from processors and consumers. As a result, many producers are forced to sell below cost, and an increasing number of farms are at risk of closure. The situation is further exacerbated by persistently high production costs and a weak bargaining position vis-à-vis large processors and retail chains, raising serious concerns about the sector’s long-term stability.

The conflict with Iran is disrupting global dairy supply chains

The ongoing conflict involving Iran is increasingly disrupting global dairy supply chains, primarily by affecting key trade routes and the costs of inputs. Restrictions and instability around the Strait of Hormuz—a key corridor for the transport of energy and fertilizers—are driving up prices for fuel, feed, and agricultural raw materials, as well as transportation costs. This is putting significant pressure on dairy producers worldwide, squeezing margins even in regions where supply remains stable for now. If disruptions persist, experts warn of rising dairy prices and greater market volatility, as the industry remains heavily dependent on global flows of energy, fertilizers, and logistics.

High levels of mycotoxins continue to threaten global livestock production

New data from Cargill indicates that mycotoxin contamination in feed remains a widespread and persistent problem, posing a serious threat to livestock production efficiency worldwide. An analysis of nearly 390,000 samples from 41 countries revealed that 71% contained detectable levels of mycotoxins, and 34% exceeded risk thresholds that could negatively impact animal production performance. Deoxynivalenol (DON) remains the most prevalent toxin, though fumonisins and zearalenone are also increasingly common. Of particular concern is the fact that multiple contamination is very common—nearly half of the samples contained three or more mycotoxins. Experts emphasize that these toxins can impair animal health, immunity, and production efficiency, highlighting the need to implement comprehensive and regionally tailored risk management strategies.