The year is coming to an end and milk prices are dragging the market down [293rd Edition Foodcom DAIRY Newsletter]

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Mid-December confirms a highly volatile end to the year on global dairy markets. An oversupply of raw milk, a sharp drop in spot milk prices and strongly varying liquidity conditions determine daily trading activity. Most commodity segments remain under pressure, while whey proteins clearly stand out, maintaining historically high price levels.

Liquid product markets are particularly chaotic in the run-up to Christmas. Extreme price spreads result from logistical constraints and irregular collection times. Market participants are increasingly focusing on the first quarter of 2026, analysing the point at which milk procurement volumes will start to decline in real terms. However, short-term sentiment remains weak in most categories.

Milk powder

The market for skimmed milk powder continues its downward trend. Food SMP is currently mainly offered in the EUR 1900-1950/MT FCA range, reflecting very competitive production costs due to exceptionally low skimmed milk concentrate prices. Many buyers find current levels attractive, but buying activity remains limited before the end of the year.

Feed SMP is also under moderate downward pressure. Buyers are signalling interest in levels around EUR 1950/MT, while sellers are still trying to keep prices closer to EUR 2000/MT DAP NL. This divergence confirms a further shift of the market in favour of buyers.

Cheese

The cheese market remains relatively resilient compared to the other dairy segments. Recent trades for gouda for delivery in Q1 2026 have been at levels of €2950-3000/MT FCA, representing a slight appreciation compared to earlier quotes.

Export demand remains supportive, with a noticeable portion of first-quarter demand still uncontracted. At the same time, a weakening fat market and falling milk prices are starting to put pressure on producer margins. The direction of the market in the coming weeks remains difficult to determine clearly.

Fats

The butter market remains under severe pressure. German retail chains have largely only secured volumes until mid-December at levels of around EUR 4200-4300/MT. The announced retail price adjustments for the second half of December point to significantly lower equivalent butter price levels, raising concerns of further declines.

Additional short-term promotional activities in the European retail trade reinforce the negative market sentiment. General availability remains high and market confidence in the short term is limited, prompting buyers to postpone decisions to contract forward volumes.

AMF prices are also trending downwards. In Europe, AMF is currently priced in the region of EUR 4800/MT, reflecting weekly declines in line with the general weakness of the entire fat segment.

Fluids

The liquid market is characterised by exceptionally high volatility. Cream prices show very wide ranges. The weakest collection dates over the festive period are quoted at levels of EUR 3000-3500/MT, while volumes with a better logistical fit again reach levels of EUR 4000-4500/MT. Such volatility creates significant challenges for traders and transport companies.

Skimmed milk concentrate saw sharp price declines. Spot transactions were carried out well below EUR 500/MT and even at even lower levels over the Christmas period. After the holidays, the market is discussing the possibility of a partial price rebound towards higher triple-digit levels or low four-digit levels, but visibility remains limited.

Whey powder

The sweet whey market remains relatively stable. Food grade material continues to trade in the region of EUR 1100/MT, while feed whey remains stable in the EUR 1020-1040/MT DAP NL range. Demand remains balanced, with no clear short-term price signals.

In contrast, the whey protein segment remains exceptionally strong. WPC 80 is currently trading above EUR 13 000/MT, while WPI has surpassed the EUR 22 500/MT level. Availability remains very limited and production capacity is not able to adapt quickly to growing demand.

Despite already very high price levels, the market expects further increases in the coming weeks. Limited supply, combined with continued demand from the food, nutrition and functional sectors, means that the whey segment remains clearly disconnected from the weaker condition of the other dairy markets.

Permeate whey and lactose remain relatively stable at lower price levels, supported by steady production and stable feed demand.

What’s new

Europe

Raw milk prices in Europe have fallen to their lowest level in ten years, with butter and cream prices reaching new annualised minima. This is largely the result of a marked increase in milk production and oversupply in the market. According to data from DCA Market Intelligence, the reference price for raw milk has fallen to around EUR 14.50 per 100 kg, which is clearly below the cost of production on many farms.

Strong price competition in the German retail trade, driven by aggressive price cuts, is benefiting consumers in the short term. At the same time, this situation is putting increasing financial pressure on dairy producers.

South America

Milk prices in Brazil are falling for the seventh consecutive month, showing a situation very similar to that currently seen in Europe. Milk supply is growing faster than demand. Better pasture conditions and higher farm productivity have increased the availability of raw material, which has reduced competitive pressure between processing plants.

At the same time, weaker domestic demand and high stock levels continue to weigh on prices, keeping producer margins under constant pressure.