The European dairy market under pressure from geopolitics and rising costs [Edition 302 of the Foodcom DAIRY Newsletter]

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After a brief hiatus last week, the Foodcom Dairy newsletter is back. 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 and entered a more cautious phase.

At the same time, rising energy, freight, and insurance costs continue to complicate global trade. Buyers are increasingly focused on securing volumes rather than optimizing prices. Despite high milk production in 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, supported by strong demand and limited availability in key regions. European SMP remains competitively priced, which continues to attract export interest.

The standard product is trading at around 2,600–2,700 EUR/MT FCA, though some cheaper volumes are still available, mainly in big bags. Feed-grade SMP is currently reaching similar or slightly higher levels, up to 2,650–2,750 EUR/MT DAP.

The market is also supported by limited drying capacity. Although skim milk powder remains relatively cheap, processors are already operating at full capacity and are unable to further increase production.

Whole milk powder remains calmer. Prices have risen to around 3,400 EUR/MT, but the market is weaker compared to SMP and butter. Availability remains relatively comfortable, and sellers are more willing to compete on price.

Cheese

Cheese markets remain strong, with foil-wrapped ripened products such as Gouda, Edam, and Cheddar trading at around 3,600–3,650 EUR/MT FCA. However, actual transactions are fewer as buyers become more reluctant at these price levels.

Retail demand in Europe remains strong, but concerns are growing about how long current prices can be sustained. If retail and export prices continue to rise, this could begin to affect demand, particularly later in the year.

The market is clearly entering a more cautious phase, and high prices are beginning to test buyers’ willingness to purchase.

Fats

The butter market was highly volatile. Prices briefly approached 5,000 EUR/MT due to geopolitical uncertainty and short-term buying, before returning to current levels.

Volumes for the second and third quarters are being discussed at around 4,850 EUR/MT, while prices for the second half of the year are already quoted at 5,000 EUR/MT or higher. At the same time, storage is becoming a real problem, as it is increasingly difficult to secure cold storage capacity.

Overall, the market currently appears more balanced. Supply remains relatively high, and many buyers are already well-covered, which limits further upside potential.

Liquids

The liquid segment remains the weakest part of the market. Cream prices rose sharply this week, reaching as high as 6,000 EUR/MT due to seasonal demand ahead of Easter and Ramadan, before falling back toward 5,400 EUR/MT.

Milk supply in Europe remains very high, and spot milk prices remain exceptionally low at €0.00–0.04/kg. Skim milk powder remains unchanged in the €450–550/MT range, reflecting the continuing oversupply.

The gap between strong finished product markets and the weak liquid segment continues to widen.

Whey and proteins

The whey markets remain one of the strongest segments. Prices continue to rise due to limited availability and strong global demand, particularly for high-protein products.

Feed-grade whey powder is trading at 1,300–1,400 EUR/MT DAP NL, while food-grade material remains around 1,350 EUR/MT. Higher energy and logistics costs are further supporting prices.

Whey concentrate remains expensive at 850–1,050 EUR/MT, as demand from protein production continues to absorb supply.

WPC 80 instant is trading at around 16,900 EUR/MT, and volumes for the second quarter are almost completely sold out. Buyers are currently focusing more on securing product availability than on negotiating prices.

Whey protein isolate remains at very high levels, close to 25,000 EUR/MT, supported by strong demand from the nutrition and functional food sectors.

At the same time, permeate remains in oversupply, with prices holding steady at around 740 EUR/MT. Lactose is trading sideways around 1,330 EUR/MT.

Overall, the whey complex remains tight, with the protein segment continuing to drive market growth, while lower-value products remain under pressure.

What else?

Oceania

Fonterra CEO Miles Hurrell has announced his resignation after eight years at the helm and a 25-year career with the cooperative, marking a significant leadership change at one of the world’s largest dairy exporters. Hurrell, who took the helm in 2018 during a challenging period for the company, will remain in his position for approximately six months to ensure a smooth transition while the board of directors searches for a successor.

During his tenure, he carried out a significant strategic reset, refocusing Fonterra on high-margin dairy ingredients and streamlining operations, including through the sale of its global consumer operations. His departure comes as the company enters a new phase focused more on strategy execution than transformation, and market attention is now centered on the selection of a successor and the continuation of the current direction of development.

Asia

The escalation of the conflict with Iran and the effective closure of the Strait of Hormuz are beginning to have serious consequences for global fertilizer markets and food supply chains. Since a significant portion of global fertilizer trade passes through this region, the disruptions have already led to a sharp increase in urea prices of about 40%, while nearly one million tons of cargo remain stranded in the Persian Gulf.

At the same time, higher gas prices and limited exports from key producers such as Qatar and Iran are further constraining supply, and some countries have already begun tapping into strategic reserves to stabilize domestic markets. Industry leaders warn that if the situation persists, fertilizer shortages could significantly reduce crop yields and increase global food security risks, particularly in regions dependent on imports.