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Bdairy Talks | February 2025
Watch the full podcast above, and scroll down for quick updates on each product group.
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General introduction
No one in the dairy industry can say that the first month of 2025 lacked excitement—or challenges. The year kicked off with Donald Trump being sworn into office, complete with some brazen salutes from a certain billionaire on stage! Wasting no time, Trump swiftly hinted at a looming tariff war against both close allies and China—because, who needs enemies when you have friends like these? Trumps Tariff wars will likely impact the EU Cheese market heavily, with Europe the main supplier to the USA cheese market. Expecting heavy tariffs to increase US production of cheese further passed the recent investments that have been made and thus cause European milk to funnel into different parts of the valorization stream, a long-term trend, however.
As if a rollercoaster of Trump announcements wasn’t enough to shake up the market, Europe saw its first foot-and-mouth disease (FMD) outbreak since 2011 (Bulgaria). While the situation appears to have been swiftly contained, the spillover effects have created turbulence in the market and some logistical headaches. On the trade front, the year started actively. Many partners continue their hand-to-mouth buying strategy, particularly on powders, leaving most uncovered for Q2 and riding the dramatic waves of dairy commodity prices. China took a step back due to its New Year celebrations, slowing activity in the final week of January. Nevertheless, it was a busy month, with numerous deals concluded both in Europe and abroad.
Milk Collections:
Europe: Milk collections across Europe are trending positively, with strong fat and protein content thanks to cheap feed, bolstered by a bumper grain harvest. From January to November, collections are reported at +0.7% vs. 2023, with final data still pending. Favorable weather conditions have supported healthy milk flows in December and January, and most partners anticipate an increase in collections throughout Q1 compared to previous years.
Oceania: Milk flows in Oceania remain strong, with collections up 1.4% from June to December compared to 2023. However, many partners remain well sold into Q2, a time when milk production in the region typically declines.
In Australia, December collections were down 1% YoY, though still within typical seasonal ranges. Overall, the 2024/25 marketing year has seen collections rise by 0.86% versus the previous year.
United States: US milk collections remain sluggish, down 0.2% year over year. Looking ahead, production is expected to hold steady as farmers are encouraged by strong commodity prices to maintain output.
South America: Collections remain weak, with Argentina down 6.5% YoY (Jan-Dec) and Uruguay down 4.08% YoY. However, farmgate prices remain favorable, and with rising commodity prices, some recovery in production is anticipated.
Global Dairy Trade (GDT) Results:
The latest GDT auction saw strong gains across most product categories, particularly:
Lactose: +17.7%
SMP: +4.7%
AMF: +2.4%
Butter: +3.4%
Cheddar: +3.7%
WMP: +4.1%
Mozzarella remained steady (-0.1%), while Buttermilk Powder dipped slightly (-0.4%). Overall, it was a busy tender with strong volumes booked by key buyers.
Foot and Mouth Outbreak:
In January 2025, Germany reported its first foot-and-mouth disease (FMD) outbreak in nearly 40 years, identified in a water buffalo herd near Berlin. Immediate containment measures included culling affected animals, transport bans, and quarantine zones.
Impact on the Dairy Market:
Export Restrictions: Germany lost its FMD-free status under World Organisation for Animal Health rules, triggering bans on meat and dairy exports from countries including the UK, South Korea, and Mexico. Additionally, Malaysia, Australia, and China issued ambiguous statements regarding German dairy shipments.
Market Disruptions: Initially, buyers hesitated, avoiding German dairy products, and trading halted for a week. Some international buyers extended this caution to all European dairy products, though these fears were quickly alleviated.
Price Volatility: The only significant price impact was on German butter, which held stable compared to other countries. Meanwhile, cream prices across Europe saw a temporary rise, excluding Germany. Overall, the market has largely moved past the event in pricing terms. Supply Chain Adjustments: Exporters turned to alternative suppliers in France and the
Netherlands, pushing demand to other regions of Europe. While the immediate turmoil has settled, ongoing market monitoring and adaptability remain essential in navigating potential aftershocks.
Outlook
The year has started with a bang! Many partners have been actively covering Q1 needs, while external factors such as currency fluctuations, political shifts, and FX movements continue to influence daily pricing. Staying vigilant and responsive to market changes is crucial for positioning effectively.
For more in-depth analysis or specific market insights, please reach out to your Bdairy representative.
Skimmed Milk Powder
Skimmed Milk Powder (SMP) prices have remained relatively stable, with values ranging from 2,400 EUR/MT EXW EU on the low side to 2,550 EUR/MT EXW EU on the high side, depending on brand and shipment period.
Stock availability remains prevalent across Europe, though not in the hands of producers, who are under no stock pressure and continue to receive timely collections. Meanwhile, Eastern Europe is producing SMP again with some partners shifting focus to butter production or cream sales, leading to a good supply of Skimmed Milk Concentrate (SMC). However, price pressure in the region is relatively low, with SMP prices holding firm above 2,450 EUR/MT EXW, as stocks are thin.
Following the initial post-FMD price dip, SMC prices stabilized around 2,100 EUR/MT EXW EU, reinforcing the necessity for SMP to be priced at 2,450-2,500 EUR/MT EXW EU for production viability—albeit with no margin. We also hear of some partners opting to sell SMC for cheese production, where retail cheese prices remain strong, rather than committing to SMP production.
From a global perspective, EU-origin SMP remains the most competitive for most destinations, with CIF parities favoring Europe, limiting potential downside. New Zealand and Australia are exiting their production season and have sold forward heavily, keeping stocks tight. Meanwhile, the USA is absent from the export market due to limited stock buildup, further solidifying Europe as the preferred origin.
With Europe continuing to produce SMP steadily, the supply-demand balance remains slightly demand-heavy, but strong supply should prevent significant upward movement.
Overall, the outlook remains neutral to slightly bullish, with a stable market underpinned by strong global competitiveness and steady production levels.
Market Outlook: Slightly Bullish
Butter
Fat prices continued to face downward pressure in January, with reported lows of 7,100 EUR/MT EXW BE, DE, NL and 7,000 EUR/MT EXW IRL for February shipments. Poland also started feeling pressure, with prices dropping below 7,000 EUR/MT EXW PL for prompt collection. However, fluctuations were evident, with BE, DE, NL trading as high as 7,400 EUR/MT during the month.
In Ireland, availability improved significantly, with November butter production up 10.7% vs October. Milk collections in Ireland also surged +33% YoY in November 2024, with no slowdown expected, ensuring healthy butter volumes.
Despite these improvements, a continental supply shortage remains. Year-to-date EU butter production is down 1.4% YoY, with notable declines in Ireland (-3.4%), France (-1.2%), and Germany (-0.9%), all key contributors to the European supply.
Demand remains strong, but buyers continue a hand-to-mouth purchasing strategy, avoiding excessive forward purchases to mitigate risks of buying at market peaks. However, prices are unlikely to slide too much, as valorization still favors alternative dairy products over butter production, particularly given firm demand for raw cream despite elevated prices.
Cream prices did however see declines, settling around 8,000 EUR/MT, primarily led by Germany, where the FMD outbreak resulted in excess stock that many buyers hesitated to take on. However, prices varied across regions—Belgium and the Netherlands rarely dipped below 8,300 EUR/MT, while Poland saw levels of 8,150 EUR/MT, allowing butter to be produced at approximately 7,000 EUR/MT EXW. That said, few partners were actively offering loads at such levels.
The market remains finely balanced—while the supply situation has improved, limiting significant upside, demand remains strong, with many partners still uncovered for March deliveries, let alone Q2. Given these factors, the outlook remains slightly bearish, with prices expected to trend softer but not collapse entirely.
Market Outlook: Slightly Bearish
BMP
BMP prices remain elevated compared to SMP, with the spread widening to as much as EUR 350/MT, depending on the brand. Current BMP prices range between EUR 2,700/MT and EUR 2,900/MT, influenced by brand and quality. Supply remains tight, driven by reduced butter production in Europe and constrained availability in the U.S., as volumes have been absorbed by the international market.
Despite these price levels, BMP usage is beginning to decline, particularly among users able to substitute BMP with SMP, which continues to see price reductions. The anticipated Q1 short squeeze has materialized, but we expect the situation to improve heading into Q2 as more product becomes available.
Additionally, liquid BMP continues to be allocated primarily to liquid product needs, further tightening the market for dry BMP. Until more volume enters the market, prices are likely to remain firm in the short term. However, the longer-term outlook points to a more bearish trend as supply catches up with demand and SMP remains the more attractive alternative.
Bdairy Market Outlook: Neutral
Full Cream Milk Powder
FCMP prices dropped over the past month as demand fell at current high price levels. Shortages persist in Europe, but even at EUR 4,300/MT, suppliers remain reluctant to produce due to low margins.
South American volumes have largely dried up, with North and West Africa absorbing much of the surplus. EU prices are currently ranging between EUR 4,200–4,300/MT, although trades as low as EUR 4,050/MT have been reported, depending on the brand.
Export demand has eased in Southeast Asia and North Africa, where Oceanian supply continues to meet demand. Chinese product is no longer discounted, and some Southeast Asian buyers are reporting good results from its use, adding complexity to the market landscape.
EU FCMP prices are expected to stay firm, as the valorization for FCMP remains low and production remains unattractive. However, demand at current levels continues to drop. Oceanian product is likely to see slight price reductions in line with reduced Chinese buying ahead of Chinese New Year (Year of the Snake). The market remains finely balanced, with further shifts expected in the months ahead.
Bdairy Market Outlook: Slightly bearish
SWP
The SWP market remains firm, supported by strong demand and limited supply across the sector. Availability of whey concentrate for SWP production is restricted, as WPC80 continues to offer better returns. Current whey concentrate prices, reported as high as EUR 800–900/MT ex-works, suggest SWP needs to price around EUR 1,200/MT ex-works to justify production.
Much of the available whey concentrate is being diverted into WPC80, leaving SWP struggling to secure raw material. Food-grade SWP prices in Europe now range between EUR 1,080–1,230/MT ex-works, with some discounts available in Southern Europe, though primarily for lower-grade product. Feed-grade SWP remains firm, trading at EUR 975/MT DAP NL, up from EUR 950/MT DAP NL in our last report.
Global supply constraints persist, with limited availability in both the U.S. and Oceania, further tightening the market. With supply remaining tight and demand robust, we maintain a bullish outlook on SWP as we head further into 2025.
Market Outlook: Bullish
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