European skim milk powder prices increased to €2,200 per tonne in late January as a short squeeze pushed dairy markets higher despite structurally weaker long-term fundamentals.

Global milk powder markets moved upward since the start of January, with Oceanian prices rising rapidly and US and EU prices following. SGX SMP futures rose $500 per tonne over one month, supported by smaller volumes on offer and demand at slightly higher price levels.

CME non-fat dry milk prices followed, rising 15% through January, partially driven by less skim milk being dried into NFDM or SMP. November US production data showed a 9.8% year-over-year decline in NFDM production, confirming significant skim milk volumes moved into other products.

The short squeeze in futures markets occurred as a relatively small number of offers led several market participants to chase rising prices. European prices increased to €2,400 per tonne for second-quarter delivery as the squeeze extended across regions.

Exchange rates played a role in the price dynamics, with the dollar dropping to its lowest level in four years. This made American milk powder cheaper and EU powder more expensive in relative terms.

Whole milk powder prices also increased, with EU WMP at €3,100 per tonne and Oceania WMP at €2,850 per tonne. The WMP increase was driven by rising Oceanian demand as volumes on offer decreased slightly, along with higher SMP prices raising the fair value for WMP.

Chinese WMP stocks stood at lower levels while domestic Chinese production remained well below 2023 peak levels, supporting expectations for increased exports. The 10% increase in SMP prices from early January levels pushed WMP prices higher quickly.

Butter showed mixed movements across regions. European butter held at €3,940 per tonne while Oceania butter reached €4,584 per tonne. US butter prices posted the largest change, increasing from $1.30 per pound to $1.60 per pound, a 23% rise in less than two weeks.

US December butter stocks ended 7% lower year-over-year despite production volumes running significantly higher than the previous year, indicating good demand. Higher exports driven by competitive prices compared to Europe and Oceania contributed to demand strength, while US butter consumption remained stable.

European butter fundamentals remained weak with structurally higher supply than demand. Current cream prices around €3,500 per tonne kept butter production costs low, increasing the incentive to produce and store butter for later in the year. This dynamic appeared likely to push stocks to record highs later in 2026.

The market dynamics reflected liquidity constraints rather than fundamental strength. With sellers under little pressure and tending to avoid selling at low prices when no direct need existed, turning positions became difficult. This imbalance between buyers and sellers proved sufficient to push prices up 10% over a short period.

Long-term dairy market fundamentals remained structurally weaker as milk production continued at surplus levels in Europe compared to 2025. Higher consumption was not necessarily forecast for 2026, placing emphasis on stocks and exports to offset lower prices.

The outlook for butter remained weak primarily due to supply fundamentals likely to keep pressuring prices lower. For SMP, the outlook became slightly tighter but remained generally downward due to supply fundamentals weighing on prices through the milk flush in Europe and the US. WMP fundamentals stayed weak but showed increased volatility as the global market reacted to uncertainties and lack of liquidity.


This newsarticle is part of a more compehensive butter market analysis. For the full market analysis, visit: https://app.vespertool.com/market-analysis/2638?commodity=dairy