Global turmoil, local impact – difficult days for European dairy [285th Edition of DAIRY Bulletin]

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The fourth quarter still does not inspire optimism. Although production remains high in many regions of the world, the factors that can upset the balance – from trade tensions to animal health problems – are becoming increasingly apparent. In Europe, the outweighing of supply over demand is exacerbating price falls in powders and cheeses, while the fats and liquid components segment remains in search of stability. It is also happening locally. In Ireland, price conflict between retail chains and producers is hitting farm profitability, in France the spread of the lumpy-skin virus in cattle is threatening to reduce supply, and in Australia the growing popularity of raw milk is raising health safety concerns.

Scroll down for detailed market data and forecasts.

Milk powder

The dairy powder market in Europe is showing clear signs of weakening due to continued high supply and moderate demand. Skimmed milk powder(SMP) prices are in the €2,000-2,100/MT range, indicating a further cooling of trading sentiment. Stocks are prompting processors to manage sales flexibly. Limited demand is unable to absorb available volumes, causing the market to enter a waiting phase for a stimulus to balance supply and demand relationships.

In the case of whole milk powder(FCMP), prices have fallen to €3450-3600/MT. Producers are seeking to maintain liquidity by reducing margins or diverting some raw material to other categories with higher profitability. Exports from the European Union remain limited, with customers in North Africa and the Middle East buying selectively in anticipation of further reductions. This situation is fostering greater competition among European plants, which are vying for short-term contracts as well as stabilising commodity flows.

In Oceania, FCMP quotations have fallen below €3150/MT and SMP remains within €2200/MT, reflecting an excess of available raw material. In the US, SMP prices are hovering around EUR 2100/MT, reflecting a stable but competitive position against European bids. The global market remains clearly saturated and any improvement will mainly depend on the reduction in milk production in the last weeks of the year.

Cheese

The cheese market in Europe remains clearly influenced by overproduction of milk, which is limiting price increases. Gouda is currently being offered in the €2,800-2,900/MT range, with continued high production volumes supporting further reductions. Mozzarella in Europe has fallen to EUR 2 900/MT, reflecting rising stocks and a lower pace of purchases at the end of the year.

Cheddar saw a slight decline, maintaining the price in the region of EUR 3 600/MT. High supply and weaker exports outside the European Union do not support an improvement in quotations, with competitive offers from the United States and Oceania further limiting the potential for a price rebound.

Outside Europe, the situation is more stable. In Oceania, prices remain virtually unchanged thanks to lower and, in the US, stable domestic demand. The global cheese market remains saturated and the direction of price movements continues to be determined by oversupply in Europe.

Fats

The European dairy fats market is seeing a further price correction, driven by high cream production and continued oversupply of milk. Butter prices have fallen to €5100-5400/MT, driven by lower demand from the food industry. Some processors are avoiding long-term contracts, hoping to stabilise the market in the fourth quarter.

In the case of AMF, the discounts are softer, with quotes in the range of EUR 6100-6300/MT. Export demand remains moderate and producers are focusing on current sales. Despite relatively attractive prices, the market shows no signs of sustained recovery. On global markets, the situation remains balanced. In Oceania, butter prices are at EUR 5400-5500/MT and AMF prices are in the vicinity of EUR 6000/MT. In the US, the market for dairy fats remains stable, with a slight increase in demand in the HoReCa sector not translating into higher prices.

Liquids

Cream prices in Europe remain in the EUR 5600-6000/MT range influenced by the high supply of milk fat and increasing milk production. Limited industrial demand is not conducive to a price rebound and transactions are mainly for short-term supply.

Skimmed milk concentrate(SMC) is experiencing sharp declines with quotations in the range of EUR 2200-2300/MT. Compared to the previous month, prices have fallen by up to several per cent, with the strongest declines in Germany, France and the Netherlands, where milk supply remains particularly high. Surpluses are being diverted to processing, which on the one hand prevents further falls, but at the same time keeps the market at a relatively low price level. In Oceania, prices for liquid components remain stable, while the US is seeing a moderate recovery in the cream segment supported by a seasonal increase in demand.

Whey powder

The whey powder(SWP) market in Europe continues to see moderate price increases. Quotations are around EUR 950-970/MT for feed and EUR 1020-1070/MT for food, with stable conditions and a slight recovery in exports. In the US, prices have increased slightly supported by stronger industrial demand.

Whey protein concentrates(WPC 80) remain at high price levels with quotes around EUR 12 200-12 500/MT in Europe. In the US, prices have increased slightly, supported by an improving functional food industry. Whey protein isolate(WPI) is also recording increases in Europe, up to EUR 20000/MT.

In the lactose market, the situation in Europe remains stable at around EUR 1 150/MT, while the US is seeing a slight increase due to growing demand from the pharmaceutical sector. Permeate in Europe remains stable at around €750/MT, while the US records a token increase supported by improving exports to Asia.

What’s new?

Ireland

Conflict between retail chains and dairy farmers is escalating in Ireland, The retail price war is supposed to attract consumers with lower prices on the shelves, but it is starting to hit farmers with unprecedented force. Discounts in the shops are not reflected in the real costs of production, which have risen sharply in recent months – from feed and energy to environmental or quality requirements. For many farms, this means operating at the edge of profitability and, in extreme cases, threatening to liquidate herds or reduce milk supplies. The industry warns that further forced reductions by retailers could undermine the stability of the whole sector and consequently make milk a scarce commodity much more expensive than it has been to date.

France

A lumpy-skin virus is spreading rapidly in France, which has forced the authorities to impose movement bans on animals and temporarily halt exports. Infections are leading to a sharp drop in milk yields, weakened herds and serious economic losses for producers, who were already struggling with rising maintenance costs. The authorities have announced strong action against violators. Failure to comply with the restrictions will result in severe fines and, in the case of repeat offences, even harsher sanctions, including the loss of the right to compensation if the herd is forcibly depopulated. Cases of infection have already been reported in Spain and Italy, raising concerns about the further spread of the virus in Europe. For the EU dairy sector, this is a clear warning signal. If the situation is not brought under control, the supply of raw material could be reduced, production costs could rise and the market could be rapidly destabilised.

Australia

In Australia, raw milk is growing in popularity, with an increasingly strong presence on the market despite clear warnings from the authorities. Demand is driven by consumers convinced of the product’s health-promoting qualities, although scientific research clearly indicates the opposite. Raw milk can carry dangerous pathogens that in extreme cases lead to dangerous complications, including haemolytic uremic syndrome. However, consumer enthusiasm persists even in the face of zoonotic threats, such as the avian influenza variant recently detected in dairy cattle. The scale of the risk is shown by the example in Florida, where an outbreak of infection linked to one dairy led to 21 illnesses and numerous hospitalisations. Experts point out that the popularity of raw milk is largely driven by misinformation – the belief that pasteurisation dilutes nutritional value. For the Australian dairy sector, this is a clear warning. Ignoring safety rules may bring short-term gains, but in the long term leads to sanitary risks, loss of confidence and market destabilisation.