The global dairy market is running two distinct stories. In milk protein, tightness remains the headline, particularly in the US where NFDM is trading at historically expensive levels and spot availability is difficult. In milkfat, the direction is the other way: European butter production is strong, stocks are building, and the Q2 to Q3 outlook is softer.

French milk production is slowing, but it is slowing from the record-high output of 2025, meaning absolute volumes remain remarkably high. Offered quantities at this week’s GDT event were notably low, consistent with the seasonal off-peak in New Zealand, where the latest milk production data came in at +6.93% year-on-year, a figure that keeps the supply picture well-supported heading into the new season.

European butter faces spot pressure. Seasonal milk and cream production is strong, stocks continue to build, and the Q2 to Q3 price outlook is under downward pressure. Forward and futures prices are running at premiums to current spot levels, but traders are currently the only active sellers at those forward levels. There is still a visible near-term floor as cream prices firm and spot offers disappear quickly, but if stocks keep building, the global picture could soften further.

The US butter market is similar: butter stocks are rising and milkfat production is growing at over 2% year-on-year. US butter exports are becoming an increasingly important release valve, and remaining competitive globally is a precondition for those flows to continue.

On milk powder, US NFDM tightness is the main pillar supporting global prices. CME Spot Call prices reflect difficult spot availability. Supply is beginning to ramp up and arbitrage trade is moving, which should gradually pull US prices closer to EU and New Zealand levels. European SMP is being produced at high volumes given the massive margin gap between skim milk concentrate and SMP. Oceanian SMP is trading slightly above European levels with strong Asian buyer interest. WMP feels slightly softer in Europe as forward buying demand slows.


For the full dairy market analysis, visit: https://app.vespertool.com/market-analysis/3015