Global dairy markets are experiencing significant realignment as US-China trade tensions create ripple effects across supply chains. According to Vesper’s latest market analysis, these shifts are causing notable price divergence in whey components, with US permeate prices plummeting 38.5% week-on-week while European prices climbed another 4%.

Supply growth across major producing regions

March production data reveals growth trends across multiple regions:

  • US milk production increased 0.88% year-over-year in March, with farmers adding 57,000 cows (+0.61%) to the national dairy herd since last year
  • New Zealand recorded a 0.63% increase in milk volumes and 0.82% growth in milk solids compared to March 2024
  • Milk solids yield is showing stronger growth than raw milk volume in several key markets

“The strong production numbers have impacted markets differently,” notes Vesper’s data research team. “Cheese markets started falling well before the latest US production data was released, while butter prices moved sideways despite stock levels rising 4% compared to last year.”

Trade flow disruption creates market volatility

The imposition of tariffs between the US and China is forcing a global recalibration of dairy trade flows, particularly in whey markets. China, as the world’s largest whey powder importer, now needs alternative sources for volumes previously supplied by the US.

This adjustment period has created unprecedented price divergence:

  • European lactose prices now command a premium of nearly 27 US cents per pound over US lactose
  • The spread between US and European whey permeate prices has reached the widest point since Vesper began tracking these markets in 2021

Shipping indicators point to broader impact

Shipping data from digital freight forwarder Shypple reveals the broader impact of these trade tensions:

  • Freight bookings from China expected to drop 30-60% in the next three weeks
  • Bookings from the rest of Asia may decline 10-20%
  • Carriers implementing blank sailings and service cuts to maintain rate stability

Looking ahead

While global supply and demand fundamentally remain balanced, the rerouting of trade flows is creating significant market friction. The existing system relies on established relationships, specific supplier approvals, and optimized logistics—all of which take time to reconfigure.

“We expect continued price volatility and further supply chain realignments in the weeks ahead,” concludes the Vesper’s dairy analyst, Jasper Endlich. “The market is witnessing a live rebalancing act unfold, complete with temporary inefficiencies that present both challenges and opportunities for market participants.”

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