Market shifts in Dairy: from SMP to Cheese, get the scoop! [224th Edition of Foodcom DAIRY Newsletter]

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The global dairy market is shifting, with mixed trends in Skimmed Milk Powder prices, strong demand for Gouda and Mozzarella, and rising prices for Butter, Cream, and Skimmed Milk Concentrate. US sanctions are causing uncertainty in the Russian dairy market, potentially reducing trade by 10-25%. Fonterra marks a decade in China’s foodservice market with expansion plans, while Denmark introduces the first livestock CO2 tax by 2030. China remains open to international dairy businesses amidst potential anti-dumping measures on EU pork imports.

Let’s take a look at what else is happening in the dairy market!

Skimmed Milk Powder

Skimmed Milk Powder for feed is currently trading at approximately 2300 EUR/MT for both spot and Q3 prices. This marks a slight decline, indicating a downward correction in the market.

In contrast, the market for food-grade Skimmed Milk Powder is seeing availability at a lower price range of 2350 to 2400 EUR/MT. However, there is an upward trend in futures contracts for Q3 and Q4, with prices projected to be between 2600 and 2700 EUR/MT. This increase in futures prices reflects the anticipated rise in demand over the remainder of the year.

Cheese

The spot market for Mozzarella and Gouda is currently active, with prices at 3950-4000 EUR/MT. Gouda is widely available through traders, while demand for Mozzarella is especially strong in Southern Europe as the region emerges from its seasonal slowdown. Prices for Cheddar and Emmental remain stable, despite the occasional availability of cheaper curd. Cagliata prices also remain at similar levels to the previous week.

Fats

Butter prices have rebounded from their lows and are currently trading in the range of 6650 to 6750 EUR/MT FCA. Prices for the third quarter are forecasted to be around 6800 EUR/MT. Futures contracts for the third and fourth quarters show bid and ask prices ranging from 6650 to 6900 EUR/MT, reflecting ongoing uncertainty in the market.

Additionally, Butter Oil and Anhydrous Milk Fat (AMF) have been on the rise since last week. We are observing increased demand, and producers are setting higher prices, which customers are willing to accept.

Liquids

Cream prices have increased to even 8000-8100 EUR/MT in some regions, driven by higher demand likely influenced by favorable weather conditions expected to boost consumption.

Skimmed Milk Concentrate prices are also on the rise, currently standing between 1800-1900 EUR/MT FCA. This increase is attributed to growing demand, indicating a robust market for this product. Additionally, some sources have mentioned prices reaching as high as 2000 EUR/MT.

Spot prices for Milk also surged, influenced by the anticipated boost in demand due to favorable weather. The market is responding to these conditions with a noticeable upward trend in prices.

Whey powders

In the Sweet Whey Powder (SWP) market for feed, there have been transactions for small quantities at a spot price of 650 EUR/MT. Third-quarter prices are slightly higher, ranging between 680 and 700 EUR/MT. Expectations for the fourth quarter suggest that prices could exceed 700 EUR/MT, reflecting a potential upward trend later in the year. SWP prices for food were rather stable last week.

Prices for Sweet Whey Concentrate have fallen significantly, by around 250 EUR/MT FCA. This significant drop could indicate lower demand or increased supply on the market.

What else?

Recent US sanctions have cast uncertainty over the Russian dairy market, potentially causing a 10-25% drop in foreign trade over the next six months. The sanctions, which halted dollar and euro trading on the Moscow Stock Exchange, are expected to increase costs for Russian businesses. Soyuzmoloko, Russia’s largest dairy industry organization, had forecasted a 15-18% rise in dairy exports in early 2024, but the new restrictions have clouded this outlook. Additionally, the surge in imports of foreign dairy equipment, valued at Rub 8.7 billion (US$98 million) in March 2024, now faces significant challenges.

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China welcomes dairy companies from all countries, including the U.S., to expand their business in the Chinese market, Vice Minister of Commerce Wang Shouwen said during a meeting with U.S. Dairy Export Council President Krysta Harden. This meeting follows China’s announcement of a potential imposition of provisional anti-dumping measures on EU pork imports, part of a probe initiated on June 17. The investigation targets mainly Spain, the Netherlands, and Denmark, in response to EU anti-subsidy duties on Chinese electric vehicles. China and the U.S. also discussed economic and trade relations, focusing on cooperation in dairy and other agricultural products.

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Denmark will introduce a tax on livestock carbon dioxide emissions from 2030, becoming the first country to do so, aiming to inspire others. The tax, proposed to help Denmark achieve a 70% reduction in greenhouse gas emissions by 2030, was agreed upon by the government, farmers, industry, labor unions, and environmental groups. The tax will start at 300 Danish crowns ($43.16) per tonne of CO2, rising to 750 crowns by 2035, with farmers receiving a 60% income tax deduction. Despite initial concerns, the compromise allows farmers to continue their operations while contributing to climate goals.