Summary
Recent developments in the dairy market highlight a significant shift in the dynamics of skim milk powder and protein demand, particularly in response to changing consumer preferences and market conditions. Skim milk powder has recently surged past the $4,000 per ton mark, driven by increased demand for protein-rich products in markets like the United States, Southeast Asia, and the Middle East. This shift is attributed to a growing awareness of health and dietary needs, with consumers increasingly seeking protein-enhanced foods. The rise in prices for whey protein has also redirected demand towards milk protein concentrates, further boosting the value of skim milk powder.
While the market for skim milk powder thrives, other dairy products such as cheese and butter are experiencing a downturn. The oversupply of milk globally has led to lower prices for fats, which were previously in high demand. In contrast, the demand for skim milk powder is being fueled by a tightening supply from the U.S., which has reduced exports of non-fat dry milk, traditionally a significant source for Southeast Asian markets. This has created opportunities for New Zealand and European producers to fill the gap, especially as countries in the Middle East ramp up their purchases.
In addition to these market shifts, concerns over El Niño's potential impact on milk production in New Zealand are influencing future price forecasts. With the current milk price futures trading at record levels, the interplay between protein and fat markets, along with currency fluctuations, will be crucial in determining the profitability of dairy farming in the coming seasons. As global dairy consumption patterns evolve, producers are urged to focus on high-value products to maintain competitiveness against emerging markets that are increasingly investing in domestic dairy production.
Show Notes
Skim milk powder has long been the by-product of the dairy world, but strong global demand for protein has turned it into one of the main drivers of the market. Anne Lee speaks with HighGround Dairy’s Stu Davison about the forces behind the latest Global Dairy Trade jump of more than 4%. They cover skim milk powder prices topping US$4000/t for the first time since 2022, and why milkfat prices are falling while powders are rising.
Host: Anne Lee, Senior Journalist, Dairy Country Guest: Stu Davison, HighGround Dairy
Stu explains how GLP-1 weight-loss drugs, protein-enhanced foods and the shift towards milk protein concentrate and ultra-filtered milk have tightened global skim supplies. He also explains why the Middle East bought its largest GDT volumes since 2012. Speaking from Singapore after visits to Indonesia and China, he shares what he saw on the ground: falling milk production in China, cautious Chinese consumers, and new desert dairy farms in Inner Mongolia and Algeria that New Zealand will have to compete with. Anne and Stu also discuss Europe’s surprisingly resilient milk supply, the growing stocks of butter, and milk price futures trading above $10/kgMS. Stu explains the role of the weak Kiwi dollar and the risk to prices if El Niño doesn’t cut milk supply as much as the market expects. He also makes the case for a disciplined hedging policy over trying to pick the market.
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