Milk production is decreasing across nearly all countries, and it’s evident that production will not significantly increase for the remainder of the season. This ongoing uncertainty in supply is pushing buyers back into the market. Reduced milk volumes and a surge in buyers have driven cream prices to €7500/mt (see Figure 1).
Figure 1: Cream prices for Benelux, Germany, France and UK in EUR/mt
This trend occurred a bit earlier than the market expected, creating a tighter market and providing the clear price direction many had anticipated. Interestingly, it is Western buyers, not China, who have returned to the market to secure their needs, as April imports in milk equivalent are 13.01% lower YTD YoY.
Effects of these trends on dairy derivatives:
- Butter Prices: Likely to increase further due to higher cream consumption and lower milk production volumes. Despite price volatility, the main question remains: how high can butter prices go before demand decreases?
- Skim Milk Powder (SMP): With more Western buyers and decreasing milk intake, there is significant upward price potential. However, SMP relies heavily on export demand, so its price increase may not match the pace of the fats side of the dairy market. Slightly higher prices are expected in the coming months.
- Whole Milk Powder (WMP): Following the upward trend of other markets, supported by reduced supply from NZ WMP in the coming months.
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