Non-fat dry milk prices rose a further 4.53% this week, leaving them just $0.055/lb below 10-year highs. The move comes against a backdrop of surging milk production across all major regions, creating a striking disconnect between raw material availability and powder market tightness.

Powder markets tighten as production rotates away from NFDM

The driver behind rising NFDM prices is not a lack of milk. It is a lack of powder. Processors across the US and Europe have been rotating production capacity toward higher-value products such as cheese, proteins and fresh milk use, pushing NFDM and SMP output to a multi-year low. Lower production has tightened available supply, pushing prices toward historic levels.

On the GDT auction this week, SMP prices rose across all regions, even as the overall auction result was broadly flat. Fonterra SMP continues to trade at a $200+/mt premium to EU SMP, reflecting the global tightness in the skim powder segment.

Milk is anything but scarce

The context makes the powder rally all the more striking. New Zealand February milk solid production was up 7.39% year-on-year, even beating a leap year comparison by 5.2%. In Europe, German milk intake is up 6.7% at the start of March, with French milk intake up 5.5% year-on-year. German farmers have moved to milking three times a day rather than two, pushing production well above typical seasonal peaks.

In the US, milk availability is equally strong, with production growth expected to come in at close to 3% year-on-year for February, with Vesper’s AI forecast pointing to as much as 5%.

Currency and inflation add further complexity

The EUR/USD exchange rate peaked at 1.20 in January before falling sharply, reopening global export opportunities for European and New Zealand suppliers. Combined with rising US NFDM prices and limited US product availability, this is helping to lift SMP prices in Europe and Oceania.

On the macro side, both the Federal Reserve and the ECB kept rates unchanged this week. The Fed revised its 2026 PCE inflation forecast up to 2.7%, while the ECB forecasts 2.6% inflation for 2026. Higher energy prices linked to the Middle East conflict are adding upward pressure to agricultural input costs, including fertiliser and logistics, which could weigh on dairy markets in the months ahead.

For the full egg market analysis, visit: https://app.vespertool.com/market-analysis/2814