Milk output growth is slowing, but the cushion built up remains
Global milk output is still growing, but the steepest gains are behind us. That is true in the US and New Zealand, where growth continues at a slower pace, and especially in Europe, where the real question now is how quickly output returns to a normal pace rather than whether it will.
What matters more right now is what has already been done with the milk produced over the past several months. Stock levels across butter, SMP and WMP all reflect months of heavy production, and the second half of the year will show how much of that cushion the market can draw down as growth cools.
Butter splits between cheap surplus and a premium for fresh Irish supply
Butter is showing the clearest split. European prices diverge between older, lower priced volumes out of the Netherlands, France and Germany, and fresher Irish butter trading at a premium. Cream prices have added some volatility to sentiment after a heat driven spike. US butter remains the cheapest origin by a wide margin, and with domestic consumption stagnant, exports have become the main outlet: they are up 105% year on year between January and May, even as a stronger dollar complicates that trade. New Zealand butter has softened too, partly because cheaper European and US supply is reducing the appeal of paying up for Oceania origin, and Europe has been gaining share of the China butter market at New Zealand’s expense this year.
SMP firms while WMP stays weighed down by abundant supply
Milk powder is a less settled picture. SMP prices have firmed in Europe over the past few weeks as cheap surplus volumes shrink and demand holds steady, while US NFDM has fallen far enough that exports should start picking up again, even though it typically trades at a discount to SMP. WMP tells a different story: New Zealand and Latin American supply is abundant and competitively priced, pulling demand away from Europe, where WMP trades at a premium and domestic demand is quiet at this time of year. Chinese buying, which stocked up heavily on WMP through the first half of 2026, tends to slow in the second half, adding another layer of uncertainty.
Outlook
The common thread is supply. With milk, cream and butter all abundant, it is hard to build a strongly bullish case for any of the three products right now, and the coming test is what happens once output growth actually slows later this year or into 2027, a shift the market expects to move quickly once it starts.
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