Global dairy trends: struggling for supplies and rising prices [240th edition of the DAIRY newsletter]

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In this edition, we look at the pressure in the skimmed milk powder (SMP) and butter markets, where prices continue to fall due to oversupply and weak demand. Cheese markets are similarly stagnant, with producers cutting prices to get rid of excess stocks. In contrast, whey protein products such as WPC 80% are showing price stability, while WPI 90% is facing supply shortages, pushing prices up. In addition, we look at the growing role of AI in the transformation of Australian agriculture and the global impact of the butterfat shortage in the EU.

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

Milk powder

The skimmed milk powder (SMP) market remains under pressure, both in the feed and food segments. Prices for feed SMP are forecast at €2425/MT in Q4 and €2450/MT in Q1 2025, indicating weak demand and buyers trying to lower rates. In contrast, grocery SMP is stable, with prices for older lots at €2300-2350/MT and fresh at €2400-2600/MT (FCA). Low trading activity due to oversupply and logistical problems could lead to further declines. New Zealand SMP, on the other hand, sees a minimal increase of 0.36% to €2665/MT, although oversupply in Oceania continues to limit price increases.

Cheese

The cheese market remains stagnant, with demand lower than supply. Gouda is quoted at €4650/MT and prices in Western Europe, especially Poland, are approaching this level, while Cheddar curd is struggling to keep prices above €5000/MT. Producers with unsold stocks are starting to cut prices to get rid of the excess. Mozzarella and Edam are also under pressure, with suppliers trying to liquidate their products, leading to further price cuts. If demand does not improve, further price falls for these cheeses are likely.

In the market, New Zealand Cheddar remains price competitive with other regions, which supports its sales, even with small price falls in Europe and the US. Prices are forecast to increase between 1-3% despite seasonal pressures.

Fats

Butter prices on the European market in Q4 2024 remain at €7400-7500/MT, but forecasts for Q1 2025 show further declines to a range of €6700-6900/MT. Butter imports from outside the EU may put additional pressure on local producers, forcing them to make further reductions, especially in the face of falling demand and high supply. In the longer term, competition from imports could further depress prices.

In the Anhydrous milk fat (AMF) market, although declines have not been as steep as for butter, a gradual decline in prices has been observed. Increasing pressure from other fat products may influence further reductions.

Liquids

Cream prices have fallen to €9650-9750/MT (FCA), probably due to seasonal oversupply or reduced demand. Producers may be selling off stocks ahead of the next production cycle. The Cream market , often dependent on demand for other dairy products, may experience further price declines in the near term.

Skimmed condensed milk (SMC) prices have fallen to €2250-2350/MT (FCA), indicating increasing market pressure. Milk prices have seen a slight increase in the last week, but buying has been difficult due to reluctance from sellers who expect further price increases or supply constraints.

Milk prices have seen a slight increase this week, although buying has been difficult due to reluctance from sellers. This volatility probably reflects expectations of further price increases or supply constraints. Seasonal fluctuations in production, together with fluctuating demand for dairy products, contribute to market dynamics. If prices continue to rise, buyer interest is expected to increase, potentially reinvigorating spot market activity and increasing transaction volumes.

Whey powder

Prices for sweet whey powder (SWP) for feed, sold wholesale on DAP terms in the Netherlands, are under sustained pressure. In Q4, the price stabilised at EUR 860/MT and the market remains calm due to weak demand. In Central Europe, prices are slightly higher, ranging between EUR 900-950/MT. Given this low level of activity, sellers may struggle to find buyers, which could lead to further price reductions in the coming months as the market adjusts to regional differences and weak global demand.

The market for WPC 80% Instant and WPC 80% has seen a stabilisation of prices, with no significant fluctuations. This equilibrium reflects steady supply and demand, with no immediate pressure to change prices, suggesting that prices are likely to remain stable in the near term.

The global market for Whey Protein Isolate (WPI) 90% is currently tight, with many producers reporting sold-out inventories. High demand and limited supply have stabilised prices, but availability issues could push prices higher if production does not increase soon.

What else?

Artificial intelligence is revolutionising Australian agriculture: Precision and efficiency in farming

Artificial intelligence (AI) is transforming Australian agriculture, increasing farm productivity through weed control, livestock health monitoring and improved water management.

AI-based drones, robots and sensors are now able to detect early signs of disease in livestock and optimise yields through precise water use. The technology also reduces chemical use by up to 96% in some cases. As Australian farmers implement these innovations, the future of agriculture becomes more sustainable and profitable, offering new opportunities for growth in the sector.

EU butterfat shortage shocks global dairy markets

The significant shortage of butterfat in the European Union is having a major impact on global dairy markets. This shortage, caused by lower milk yields and increased global demand for high-fat dairy products, is pushing up prices for products such as butter, cream and other dairy products. Producers in Europe are struggling to keep up with demand, while countries dependent on EU dairy imports are facing supply constraints. The shortage has had a knock-on effect, driving up prices and supply chain challenges in international markets, raising concerns for the coming months.