SMP gets cheaper, WPI hits record highs – what lies ahead for the dairy industry? [258th Edition of DAIRY Newsletter]

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Welcome back to our newsletter!

Let’s take a look at what has been happening in the dairy market recently!

Milk powder

The European skimmed milk powder (SMP) market continues to show signs of weakness. Food grade SMP prices have fallen to 2450-2475 EUR/MT.

A significant development over the past few weeks was the recent ONIL tender, which resulted in the sale of 18,000 MT of European SMP at 2700 EUR/MT CFR, mainly supplied by western EU traders and an eastern EU producer. In addition, the tender included 16,000 MT of SMP at around 4135 EUR/MT CFR (4300 USD/MT CFR), suggesting that SMP is unlikely to be sourced from the EU. Despite the completion of this tender for April-July delivery, market sentiment has turned bearish, with more bids coming to market. The outcome of this tender could affect sentiment in Europe in the coming weeks.

European buyers remain hesitant, waiting for further price declines before committing to large volumes. Southeast Asia has shown some interest, but not at a level that could drive prices higher. Demand in Europe appears to be at around 2400-2450 EUR/MT, where more offers are coming in.

Prices in the US are falling sharply due to relatively high milk supply in several regions combined with weaker demand, causing prices to fall rapidly. Meanwhile, prices in Oceania are also falling, influenced by reduced demand from key import markets such as China.

In the feed grade skimmed milk powder market, prices showed little change. The wholesale price in Europe rose to 2420-2470 EUR/MT, reflecting limited supply, but demand remains weak. SMP for DAP NL bulk feed softened slightly, with bids at 2450 EUR/MT or lower for Q1 and Q2 deliveries.

Cheese

The European cheese market remains stable despite mixed signals. Gouda is trading at 4300 EUR/MT or higher, while edam remains at 4250 EUR/MT. Mozzarella has rebounded to 4100 EUR/MT or higher and cagliata remains at 4200 EUR/MT. Emmental maintains 5200 EUR/MT due to stable demand.

Demand for emmental and gouda remains stable, particularly due to steady orders from the catering sector. Mozzarella has seen an increase in export interest, especially to the Middle East and Asian markets, where consumption of processed foods is increasing. Cagliata, widely used in processed cheese production, has maintained stable prices, although rising transport costs could push prices higher in the future. Meanwhile, edam is experiencing slight downward pressure due to seasonal overproduction in Central Europe.

In the US, cheese markets are under pressure from oversupply, resulting in declines in export prices for cheddar and mozzarella. Uncertainty over a possible 25% import duty on cheeses from the EU introduces additional volatility, which may force European exporters to seek alternative markets such as South America and Asia. Nonetheless, demand for high-quality ripened cheeses such as emmental is growing in the US as consumers increasingly opt for premium dairy products.

Fats

Butter prices have risen sharply. The new retail price in Germany is now around 7700 EUR/MT, and reports indicate that another retail chain has set a price of 7500 EUR/MT for monthly deliveries. Q2 contracts have seen a rebound, exceeding 7200 EUR/MT for various origins, while March offers are in the 7200-7300 EUR/MT range for Germany, the Netherlands and Belgium. In Poland, butter prices have exceeded 7400 EUR/MT, reflecting a broader upward trend in the market. As the retail price rises, the consumer price in Germany is expected to fall, potentially boosting demand in the coming weeks.

Anhydrous milk fat (AMF) prices have risen, following the upward trend in cream prices, as strong demand and market dynamics continue to drive values higher. In Europe, bids for AMF have now exceeded 9000 EUR/MT, reflecting the continued strength of the market.

Liquids

The cream market in Europe has strengthened, with cream sourced from Germany now trading in the 8400-8500 EUR/MT range, while emergency purchases have reached 8800 EUR/MT. In Poland, prices are even higher, with some transactions observed at 8900 EUR/MT. Despite typically lower seasonal demand due to cooler weather, consumption is expected to increase as the warmer months approach. Some buyers are entering into larger contracts ahead of anticipated price fluctuations, while others are closely monitoring whether increased milk production will help ease upward pressure on cream prices.

Spot milk prices have increased slightly, currently trading at 520-540 EUR/MT, driven by seasonal fluctuations and lower than expected production in France, where volumes are 10% lower compared to the five-year average.

Concentrated skimmed milk (SMC) prices have increased, currently trading at 2250-2300 EUR/MT in Germany, reflecting strong demand from processors. With the seasonal increase in milk production, SMC availability is expected to improve, but demand from dryers and cheese makers remains strong, which could limit downward price movements.

Whey powder

European whey protein and powder markets remain stable, despite some regional fluctuations in supply and demand. While the US market is struggling with oversupply, European protein concentrates continue to enjoy strong demand, particularly from the sports nutrition and food processing industries.

Sweet whey powder (SWP) prices remain stable, with food grade SWP at 1100 EUR/MT, while feed grade SWP is at 950 EUR/MT. Wholesale DAP NL transactions for Q1 and Q2 remain in the range of 920-940 EUR/MT. European whey concentrate markets remain stable due to steady production and demand from the feed sector, while in the US, oversupply puts downward pressure on prices.

Some buyers are still looking for March volumes as they were unable to secure sufficient supply in Q1. Buying activity has been somewhat delayed this year as many were expecting the usual seasonal price drop at the start of Q1, but this did not materialise. As a result, some buyers are now forced to buy later than usual, often at higher prices.

Producers in both Europe and the US continue to operate with low inventory levels, giving them strong price control without downward pressure on rates. As WPI offers significantly higher margins, many producers are shifting production from WPC80 to WPI. While demand for WPC80 remains robust, exports – especially from Germany – have not yet fully recovered. In addition, whey concentrate prices at around 800 EUR/MT provide solid price support in the European market, preventing significant price declines for WPC80. Meanwhile, bids for WPC80 instant have now exceeded 11 200 EUR/MT, further reflecting tight market conditions and continued demand.

WPI remains one of the most scarce protein products in the world, with near zero availability. Both European and US producers are facing severe supply constraints, putting further upward pressure on prices. Given the significant price differential between WPC80 and WPI, producers are prioritising WPI production whenever possible, as it offers significantly higher profitability. This change further limits the availability of WPC80 on the market.

Demand for WPI remains exceptionally strong, with buyers around the world actively seeking supply, often willing to pay a premium even for small quantities. Despite new players and products entering the market, supply remains limited and competition is only adding to the growing pressure. As a result, prices continue to rise, now exceeding 22000 EUR/MT, with no sign of relief in the short term.

Whey permeate markets remain stable, with European prices around 740-760 EUR/MT, while US prices are slightly lower at 600 EUR/MT. Demand remains robust as permeate is a viable ingredient in the food and feed industry. Lactose prices remain stable in Europe, currently at 1000 EUR/MT, while US prices are under some pressure at 800 EUR/MT, reflecting the high level of production in the US market.

News

Oceania

New Zealand recorded a significant increase in milk production in January, reaching 211.85 million kg of milk solids – 5% higher than a year earlier and well above forecasts. This is the highest since 2021, and production is up 3.9% year-on-year since the start of the season. Dairy exports also skyrocketed – up 9.6% y-o-y to US$1.63 billion, the highest since December 2022. The highest demand was for milk powder and dairy fats, particularly in Asian countries.

Milk production in other regions was less dynamic, with Argentina and Uruguay recording increases (5.6 per cent and 2.2 per cent respectively), but the US and Europe maintaining almost the same level as a year earlier. China, New Zealand’s key export market, increased dairy imports by 17.3% in December, with the value of imports rising by as much as 31.2%. The biggest increases were in milk powder ( 42%) and butter ( 39%). However, experts warn that rising stocks and China’s economic situation could weaken demand in the coming months, which could affect future prices and strategy for New Zealand producers.

North America

The United States Department of Agriculture (USDA) unexpectedly froze almost $30 million allocated to the Dairy Innovation Support (DBI) programme, affecting more than 400 businesses across the country. The funds were supposed to go to small farms, such as Uplands Cheese in Wisconsin, which had already invested their own funds in anticipation of the grants. Owners fear that without the promised money, they will not be able to continue growing their businesses, which could threaten the future of local dairy production.

Industry organisations, including the Wisconsin Cheese Makers Association, are calling for the funds to be unlocked immediately, stressing that delays could stifle innovation in the dairy sector. The USDA has so far given no indication if or when the money will be released, leaving hundreds of small producers in uncertainty. Meanwhile, the topic is becoming political as the decision to freeze the funds is part of the administration’s broader focus on federal grants and loans.

Europe

Research from the Norwegian University of Life Sciences (NMBU) has shown that the choice of grass species and frequency of harvesting significantly affects cow milk yields and methane emissions. The experiment compared silages of meadow timothy, perennial ryegrass and red clover, harvested at different cycles. Cows fed grass harvested more frequently (three times per season) produced more milk with a higher energy value and emitted less methane than when harvested less frequently.

The results confirm that earlier and more frequent grass cutting improves forage digestibility, resulting in better milk yield and reduced greenhouse gas emissions. Optimising harvesting practices and selecting appropriate grass species can be key to more sustainable milk production, combining economic efficiency with environmental concerns.