WPI hits record highs and dairy market remains under supply pressure [295th Edition Foodcom DAIRY Newsletter]

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Trading in mid-January continues to show clear differences between the various segments of the dairy market. Some products are becoming more expensive and harder to access, while others remain under pressure due to very high milk supply and limited capacity. Trading activity has largely recovered from the festive period, but overall sentiment remains cautious. Buyers are increasingly focusing on securing needs for the end of Q1 and Q2, rather than being active in the spot market.

Milk purchases across Europe remain at exceptionally high levels. This continues to put pressure on liquid product markets and limits the upside potential for products strongly linked to the price of raw milk. At the same time, dairy protein markets are reaching very high price levels. Production is increasingly shifting towards higher-margin whey proteins, leading to reduced availability in other dairy categories.

Milk powder

The skimmed milk powder market remains relatively stable. Food SMP is quoted in the range of €2050-2150/MT FCA and availability for quick terms is limited. Market information suggests that some producers, including Onil, already have largely sold out production from May to August, reducing flexibility in the short term. With Ramadan (17 February-19 March) approaching, purchasing activity has weakened somewhat, but the overall market situation remains stable.

Feed SMP is following food quality prices and is currently discussed at levels of 2000-2050 EUR/MT DAP NL. Some traders, who previously sold at lower prices, are trying to delay offtakes, hoping for a price correction. For the moment, however, the market is not showing clear downward signals.

At the same time, very high milk supply and competitive production costs continue to limit the potential for stronger increases in the medium term.

Cheese

The cheese market remains stable or slightly stronger. Gouda and Edam remain easily above the EUR 3,000/MT level, while Cheddar curd stabilises around EUR 3,250/MT. Producers are not feeling any sales pressure and there is apparent demand from end users, which has not yet been largely covered by contracts.

Looking towards Q2, price expectations in the range of EUR 3100-3150/MT for Gouda, Edam and Mozzarella are becoming more frequent. These are supported by stable consumption and no need to aggressively increase production at current margins.

Fats

Butter prices have weakened slightly in recent days and are currently in the EUR 3850-4050/MT range. Despite this short-term decline, producers continue to report strong retail demand. Early Q2 talk is increasingly centred around levels close to €4,000/MT, although supply pressures suggest the possibility of a further short-term correction.

Fluids

Liquid product markets remain under strong supply pressure. Concentrate skimmed milk (SMC) prices have risen, with current indications in the EUR 600-800/MT range. However, actual transactions are taking place over a very wide range, from EUR 500 to as much as EUR 1000/MT, depending on quality, location and urgency of delivery.

Cream prices vary, reflecting uneven demand and continuing logistical constraints. On the one hand, transactions at levels of EUR 3300-3400/MT are being quoted, while on the other there are signals closer to EUR 3500-3700/MT. Very high milk flows and insufficient capacity clearly show that liquid markets remain oversupplied.

Whey powder

The sweet whey powder market remains stable. Food SWP remains around EUR 1100/MT, while the feed material is quoted at EUR 1000-1040/MT DAP NL levels. Production is limited as producers focus on making whey proteins, but moderate demand for SWP means that prices remain in a sideways range.

Whey concentrate prices remain unchanged at EUR 700-800/MT and are mainly relevant for producers targeting drying high-protein WPC.

Whey protein complex clearly stands out. WPC80 prices are approaching EUR 14,000/MT, while WPI is already above EUR 23,000/MT, reaching record levels with very limited spot availability. Buyers are forced to secure volumes for Q2 much earlier than usual.

The latest market data confirm the exceptional tightness of supply in the whey protein segment. Production continues to shift strongly towards WPC80 and WPI, limiting availability across the whey complex. As a result, this maintains price support for sweet whey powder, while the whey permeate market remains clearly oversupplied and lactose prices are gradually increasing as Q1 availability is largely oversold.

Whey proteins remain the strongest segment of the dairy market and are increasingly breaking away from traditional supply and demand fundamentals.

What’s new

North America

The US dairy cow herd is now near its highest level in about three decades. This is partly the result of the continued implementation of beef-based strategies that are improving revenue per animal and encouraging farmers to keep cows in herds. This expansion has contributed to an increase in milk production, even though milk prices have been on a downward trend in recent months. At the same time, the increased number of cows is putting additional supply pressure on the dairy sector as a whole. The higher herd size is expected to influence market dynamics throughout 2026, especially in the context of raw milk availability and the purchasing decisions of processors and consumers, as well as the balances of individual products.

North America / Europe

Highly pathogenic avian influenza (HPAI) continues to circulate among US dairy cattle. Confirmed cases have been reported in many states and the virus is periodically detected in routine milk testing, including the first confirmed case in the state of Wisconsin late last year. The European Food Safety Authority (EFSA) assesses the risk of the spread of this particular strain of H5N1 from the US to dairy cattle in Europe as very low. At the same time, experts stress that the possible emergence of the virus in Europe could have a significant impact on the EU livestock sector. As a result, there are calls for reinforced monitoring and tighter bio-security measures at farm and border level. EFSA identifies potential preventive measures, including trade restrictions for affected regions and strict cleaning procedures for milking equipment, and calls for coordinated surveillance by farmers and veterinarians to protect animal health.