Volatility is decreasing, but dairy product prices in Europe remain high [299th edition of Foodcom DAIRY Newsletter]

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At the beginning of February, European dairy markets experienced a period of exceptional volatility. Prices fluctuated sharply in a short period of time, mainly due to technical factors and very limited liquidity. Sellers withdrew from the market, while buyers rushed to secure supplies, causing prices to skyrocket. Once these higher levels were reached, interest in selling returned and the market calmed down again.

Although prices have corrected from last week’s extreme levels, they remain well above where they were at the beginning of the month. Markets are calmer now, but confidence remains fragile. Liquidity is still low, and market participants are reassessing what sustainable price levels should look like in the European dairy sector.

Milk powder

Skimmed milk powder was the main driver of change in the European market last week. Prices rose rapidly as available offers were withdrawn almost immediately and sellers withdrew from the market. This caused prices to surge within a few days. This week, the situation reversed somewhat as buyers withdrew and sellers reappeared at higher price levels, leading to a correction.

Despite this decline, SMP prices remain at a good level. Export demand has improved as European products remain competitive on the world market. At the same time, milk intake across Europe remains high, limiting upside potential in the event of increased production pressure.

Whole milk powder followed the increase but showed less fundamental strength than SMP. European milk powder production remains limited as producers continue to favor SMP and butter. Current price levels appear somewhat overstretched, and once markets stabilize, fair value is expected to settle slightly above €3,200/MT.

Overall, milk powder markets are in a phase of rebalancing after the recent decline, and prices are likely to consolidate rather than continue to fluctuate sharply in either direction.

Cheese

Cheese markets remain relatively stable compared to the sharp movements seen in powders and fats. Prices are supported by steady demand and the strength of milk components. Producers appear comfortable with their sales position and are not actively bringing additional volumes to the market.

Butter and cream prices continue to influence cheese prices as they determine milk allocation decisions. Availability of spot deliveries remains limited, while demand for near-term and second-quarter deliveries is stable.

Overall, cheese prices remain stable and there is no immediate downward pressure.

Fats

Butter prices have fluctuated sharply over the past two weeks. Prices rose sharply as buyers reacted to limited availability and rising SMP values, then corrected as demand weakened and sellers returned to the market. Even after the correction, butter prices remain at historically high levels.

Overall, the European butter market still appears relatively weak. Production remains high, stocks are growing, and cream prices remain low at around €3,900/MT. This makes butter production still very attractive, encouraging further increases in production.

At the same time, buyers are increasingly inclined to secure volumes at current levels, preferring price certainty rather than waiting for further corrections. As a result, butter prices are expected to find support slightly above €4,000/MT in the near term.

Liquids

Cream prices remain low relative to butter prices, which strengthens the economics of butter production. Interest in selling remains limited at current levels, while buyers do not see the possibility of an immediate drop in prices.

Raw milk supply in Europe remains high, and spot market milk prices are not following the rise in finished product prices. The dynamics of the liquids market continue to be driven more by decisions regarding processing capacity and product range than by the availability of milk itself.

Overall, fluid supply remains high, and prices are increasingly influenced by downstream markets.

Whey and proteins

Whey markets remain one of the strongest segments of the European dairy complex. Sweet whey powder (SWP) prices are stable or rising, with food-grade SWP trading at around €1,120/MT and feed-grade SWP at around €1,100/MT. The market continues to be supported by high whey concentrate prices and limited raw material availability.

Whey protein markets remain exceptionally tight. The price of WPC 35 is currently around €2,750/MT, and prices continue to rise. The high-protein segment remains particularly strong, with WPC 80 (instant) trading at around €15,780/MT, reflecting strong demand and very limited availability on the spot market.

WPI prices remain at historically high levels, around €23,500/MT, and the market is stable or strengthening slightly. Most of the production has already been sold in advance, and limited processing capacity continues to constrain supply.

Strong demand from the functional and nutritional food segments continues to underpin the market, largely insulating whey proteins from the volatility seen in the butter and milk powder markets.

What else?

Europe

Arla Foods posted record financial results in 2025, delivering the highest ever returns to its farmer owners despite sharp fluctuations in European dairy markets. The group’s revenue reached €15.1 billion, supported by high raw material prices in the first half of the year and record milk intake of 14.3 billion kg, with net profit reaching €415 million. Although a sharp increase in milk production in the second half of the year caused a market correction, Arla’s diversified business, particularly its value-added ingredients and proteins segment, helped mitigate the downturn, and the cooperative expects the supply-driven correction to last until early 2026.

Europe

Dairy UK brought together leading international experts at the Royal Society of Medicine to examine the science behind healthy aging and the growing confusion among consumers caused by misinformation about diet. The conference highlighted the importance of high-quality protein, bone-supporting nutrients, and overall diet quality for maintaining strength, mobility, and independence throughout life, as well as the role that dairy products can play in supporting health. Speakers highlighted the need for evidence-based nutritional guidance in the face of diet trends set by influencers, reinforcing Dairy UK’s commitment to science-based dialogue on public health.

Europe

New data from Ireland’s Central Statistics Office shows that milk prices fell by 30.4% year-on-year in December 2025, contributing to a 4.9% decline in the annual agricultural production price index. The monthly decline was mainly due to lower milk and cattle prices, reflecting continued pressure on farm incomes at the end of the year. Despite this correction, the annual production price index for 2025 remained higher than in 2024, supported by high cattle prices, while production costs rose only slightly as higher fertilizer prices were partially offset by lower feed and energy costs.