Insight Focus
Nonfat dry milk prices are showing signs of stabilising. After shifting from a winter supply shortage to a surplus as exports weakened, traders said the market appears to be finding a bottom and buyer interest is improving. Tightening cream supplies and summer heat could further influence milk production, while strong demand continues to support high-protein dairy ingredients.
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Nonfat Dry Milk Market Finds Support After Correction
Dairy product markets were mixed this week, as nonfat dry milk showed signs of stabilising after a sharp correction, while high-protein ingredients continued to outperform amid strong demand and seasonally tightening milk supplies.
Analysts said nonfat dry milk has come full circle since winter. Supplies tightened after an FDA Class I recall removed product from the market just as strong protein demand diverted more milk into condensed skim and ultra-filtered products, pushing prices higher.
Elevated US prices later slowed exports and increased nonfat dry milk production, quickly shifting the market into surplus. With May exports down 20% from a year earlier and US prices now back in line with the rest of the world, traders said the market appears to be finding a bottom, and buyer interest is beginning to improve.
Milk production followed a typical seasonal pattern, as early July heat reduced milk volumes and component levels. The first heat wave of the summer caused only temporary production losses, with cooler weather expected to recover much of the decline. Additional periods of hot weather later this summer could lead to a more lasting reduction in milk output.
Cream availability was tightening as more supplies shifted into ice cream production, though butter churns are expected to remain busier than normal for this time of year due to stronger demand. Heatwaves in Europe are expected to have a greater impact on milk production than in the US, where modern cross-ventilated dairy facilities help limit production losses.
Protein Ingredients Outperform as Supplies Remain Tight
Manufacturers continue to prioritise higher-value whey protein concentrates and isolates over commodity dry whey, keeping supplies of protein ingredients tight. Dry whey markets were steady, while whey protein concentrate 34% and lactose values were steady to firm due to limited inventories and strong contract demand.
Cheese markets were balanced despite lighter seasonal milk supplies. Butter markets were steady as tightening cream availability offset softer seasonal demand. Traders cautioned that export demand will ultimately depend on consumer spending, noting that higher fuel prices could weigh on food purchases heading into the holiday season.
