The European dairy market is under supply pressure. Proteins remain the strongest segment [Edition 305 of the Foodcom DAIRY Newsletter]

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European dairy markets continue to undergo a period of change in the second quarter, under growing supply pressure resulting from a seasonal increase in milk production. While the first quarter was characterized by high prices despite ample milk supply, the current quarter brings a clear shift in sentiment—weaker demand and increasing product availability are beginning to balance the market.

The initial need to quickly secure volumes has clearly weakened, and buyers are becoming more cautious after having previously contracted supplies for the coming months. At the same time, producers are facing rising production and, in some cases, growing inventories, which is putting additional pressure on the spot market.

As a result, the dairy market is becoming increasingly fragmented—the protein segment remains exceptionally strong, while milk powders, fats, and cheeses are gradually losing value due to rising supply.

Milk powder

The skim milk powder market is clearly weakening, with prices falling to the 2,550–2,650 EUR/MT range. The market’s earlier strength, driven by exports, is fading as buyers show less interest at higher price levels and global uncertainty has eased somewhat.

At the same time, production in Europe remains high thanks to ample milk supply and favorable processing margins. Additional drying capacity has been brought online in recent weeks, further increasing supply at a time when demand is beginning to weaken.

Feed-grade SMP continues to track the food-grade segment in terms of price, and the differences between them remain small. Buyers are well-hedged and cautious, which limits the potential for price increases in the near term.

Whole milk powder is also under pressure, with prices falling toward 3,300 EUR/MT. The product is losing ground due to both weaker butter and SMP prices, while global demand remains moderate. Increased production in Europe and competitive offers from other regions are keeping the market defensive.

Cheese

The cheese market is weakening as the second quarter progresses, as greater milk availability translates into higher production volumes. Following strong retail demand during the Easter period, market activity has returned to more standard levels, limiting current buying interest.

Gouda and mozzarella are currently quoted at around 3,450–3,550 EUR/MT, and sellers are increasingly active in trying to place available volumes. Buyers, on the other hand, are exerting less buying pressure and often expect further price adjustments.

Cheddar remains at similar levels, though the overall market tone is weakening slightly. While no sharp declines are yet visible, the balance has clearly shifted toward greater supply and less aggressive demand in both the domestic and export markets.

Fats

The butter market remains under pressure, though short-term price movements are becoming more mixed. In recent days, prices have rebounded slightly, and some European offers have returned to around 4,100 EUR/MT, while products from other sources, such as Ireland, are still being offered at lower prices.

Despite this temporary rebound, the overall market structure remains weak. The high availability of cream, resulting from high milk supply, continues to support butter production, and significant quantities of the product are being stored.

Buyers are well-stocked and show no urgent need to purchase, which maintains the difficult situation on the spot market. As long as milk supply remains high and cream relatively cheap, the butter market is likely to remain under pressure with limited upside potential.

Liquids

Liquid markets continue to reflect the seasonal increase in milk supply, although price movements are becoming increasingly volatile.

Cream prices rose over the week from around 4,100 EUR/MT to as high as 4,400 EUR/MT. This rebound highlights short-term market volatility, even though the overall trend remains tied to high milk supply.

Skim milk concentrate has risen significantly in price and is currently trading in the range of 1,300–1,500 EUR/MT. This increase is mainly due to strong demand from processors and shifting profitability between powders and fresh products.

Spot milk remains widely available, and in some regions, supply continues to exceed processing capacity. Although there are early signs that the peak of milk production may already be passing in some countries, overall availability remains high, and structural pressure in the fluid milk segment persists.

Whey and proteins

Whey markets are becoming increasingly diverse. Prices for sweet whey powder have weakened slightly due to weaker export demand and the fact that many buyers secured supplies for the second quarter earlier. Trading activity has slowed, and the market is seeking a new equilibrium at slightly lower levels.

At the same time, whey concentrate prices remain firm at 650–850 EUR/MT thanks to strong demand from the high-value protein production sector.

The protein segment remains the strongest part of the entire dairy market. WPC80 remains in very limited supply, and prices remain well above 20,000 EUR/MT. Demand continues to significantly exceed production capacity, and buyers are actively seeking available volumes even at very high prices.

WPI is also maintaining strong price levels—around or above 25,000 EUR/MT—though the market is slightly less tight than for WPC80. The relatively small price difference between WPI and WPC80 creates additional momentum that could support further increases.

Whey permeate remains under structural pressure due to persistently high supply, which keeps prices at relatively low levels. The lactose market is more balanced—demand for standardization remains stable, though less urgent than earlier in the year.

Overall, the whey and protein segment continues to reflect the growing polarization of the dairy market, where strong demand for proteins stands in stark contrast to the weaker situation in other product categories.

What else?

Europe

Another important trend influencing the dairy market is the growing importance of functional foods, as noted by Danone. Consumers are increasingly looking for products that support gut health, contain fiber, and have simple, “clean” ingredients. According to the company’s data, nearly 70% of consumers are actively trying to increase their fiber intake, which is no longer associated solely with digestion but also with immunity, metabolism, and weight management.

This trend is driven by social media and growing health awareness, prompting manufacturers to reformulate products and create new categories, such as dairy products enriched with fiber or prebiotics. Consumers are also scrutinizing product labels more closely, paying attention not only to nutritional values but also to quality, naturalness, and transparency of ingredients.

World

The global milk market further compounds the challenges facing the British dairy sector. Data from the United States, Australia, and New Zealand show that milk production remains high despite falling prices, leading to oversupply and increasing pressure on profitability.

In 2026, global production is growing mainly due to the United States, where an increase of approximately 1.2% is projected. Australia is rebuilding production after earlier declines, while New Zealand is seeing a slight drop in supply, partly due to herd reductions. Overall, global milk supply continues to exceed demand, which is driving down dairy prices and forcing processors to cut payments to farmers.

Although the pace of production growth is expected to gradually slow, the market remains oversupplied, and high volumes in the U.S. and Oceania continue to put pressure on prices. Combined with the trend of replacing milk fats with vegetable oils, this poses a serious challenge for dairy producers in the UK and Europe.