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Dairy Market: Oversupply? Newsletter – January 12, 2026

Thu, 01/08/2026 - 20:57

Dairy Market Analysis from 12-1-26; Milchmarkt Marktanalyse vom 12-1-2625

Dairy Market Analysis from 12-1-26; Milchmarkt Marktanalyse vom 12-1-26

Review and Analysis

First, we wish everyone a successful and fulfilling New Year.

The figures for calendar week 52 show positive changes; however, these are mainly driven by limited processing capacity during the holiday period. In some cases, milk traded as low as €0.01/kg. Many market participants only resumed activity on January 7, resulting in limited market momentum so far.

In Northern Europe, farmgate milk prices are well below €0.40/kg. The Kiel raw milk value fell to €0.305/l in December. In the medium term, large dairies will need to align payout prices accordingly to avoid structurally subsidizing butter and powder production.

The United States has significantly expanded production and is expected to remain price‑setting in 2026. Unlike 2025, a renewed sharp depreciation of the USD is unlikely.

Next week’s trade fair in Bologna should provide the first direct indication of market sentiment.

Milk Supply

Germany: CW 52 +6.8%, CW 50 +7.7% vs. prior year
France: CW 52 +5.7%, CW 51 +7.0% vs. prior year
USA: Nov 2025 +4.5% vs. prior year; Jan–Nov +2.6%

Milk Utilization

Germany/EU: Large volumes of skim milk were dried into SMP over the holidays; semi‑hard cheese production continued.
USA: Additional milk mainly flowed into butter and cheese (Jan–Nov 2025: butter +6.2%, cheese +2.5%; Cheddar stronger than Mozzarella). SMP −5.5%, MPC −9.9%; whey shifted toward WPI (+11.4%).

Inventory Situation

Semi‑hard cheese (Germany): Stocks in ripening warehouses increased slightly due to fewer logistics days but remain low; no selling pressure.

Demand (Germany)

Fresh products: Reported strong Christmas sales.
Butter: Retail butter remained well demanded over the year‑end period.
Cheese: Continued solid demand for semi‑hard cheese, including export opportunities.
Powders/Whey: SMP market quiet due to holidays; prior buying interest noted. WMP rather quiet. Whey powder stable; whey protein concentrates tight.

GDT Event 395

GDT +6.3% – the first recovery after nine consecutive negative auctions, driven by significantly lower New Zealand supply (−19%). The futures market reacted cautiously, reflecting doubts about sustainability. If NZ supply remains tight in upcoming auctions and EU/US spot prices hold, Q1/Q2 could stabilize earlier than expected; otherwise, renewed downside risk remains.

Switzerland

Processing capacity was also tight in Switzerland. Shortly before Christmas, the A‑milk price was reduced from CHF 0.82 to CHF 0.78/kg. If milk volumes do not decline quickly, the effective payout price could fall up to CHF 0.30 below the A‑price.

Oversupply

The second half of 2025 was characterized by excess milk, and supply levels in 2026 still appear ample.

Outlook

Forecast visibility remains limited. It is advisable to wait for the next two GDT auctions (through February 3) to better assess market direction.

Q1 2026 – Market Tendencies

Gouda (semi‑hard cheese): Mostly sideways with downside risk.
Mozzarella (block): Tending weaker.
Cagliata: Structural disadvantage versus finished Mozzarella; overhangs likely.
SMP: Potential for “holiday milk” discounts.
Butter: Clear price pressure; inventories full.
Whey proteins (esp. WPC80): Still highly valued; seasonally softer in January.
WMP: Weak, closely linked to milkfat.

Q2 2026 – Preliminary Assessment

Visibility for Q2 remains too limited for aggressive forward coverage as long as milk volumes stay high, commodity milk values remain well below payout prices, and no real relief is visible on the fat side.

No major Q2 volumes should be committed before January 15. Thereafter, depending on the product, secure a maximum of 20–30% of Q2 requirements in initial tranches and keep the remainder flexible.

Recommendation for 2026

Sustainable structures, not short‑term trading

In 12–18 months, milk availability could tighten again, making stable and reliable suppliers a competitive advantage. We therefore recommend an early review of supplier portfolios and the definition of strategic partners to close existing gaps.

We support both manufacturers and processors:

For manufacturers: Reliable customers, export services, transparency, receivables management, and formulations
For processors: Reliable supply chains, market intelligence, application and quality support, as well as investment and sales support