Dairy Sector Faces Mixed Forecasts as Summer Break Begins: Supply Dynamics and Global Trade at Play

As we step into the summer break, the dairy sector faces mixed forecasts influenced by supply dynamics and global trade. The EU's recent increase in milk production—up approximately 1.2% year-on-year—has relieved producers, but the market is saturated. Regional disparities are noted, with strong output in countries like Ireland (+7.6% YTD) contrasting with Germany, which remains down by over 1.2% compared to last year.

The forecast remains bearish as liquid demand slows, and the onset of summer sees uncertain butter consumption and price fluctuations influenced by favorable production conditions and weak demand. With butter stocks projected to rise by 65,000 mt due to reduced exports and increased imports, market analysts predict continued pressure on prices, potentially falling below €6,000/mt by year-end.

In the cheese sector, although EU production has grown almost 1% from last year, rising imports and declining exports signal a tighter market environment. U.S. import duties are restricting cheese export growth, adding further complexity to an already challenging landscape.

Despite the bearish outlook in other dairy sectors, the powder market presents a glimmer of optimism, driven by shrinking supply conditions in SMP production, which is down 2.3% YoY, and an increase in exports by 4.5%, potentially offsetting additional supply inflows. Though not poised for a breakout rally, the powder market may see moderate upward traction if current trends persist.

Overall, the dairy market enters a season of uncertainty, with surplus concerns across key products such as butter, cheese, and powders. As global production ramps up and EU exports face new tariffs, stakeholders must navigate a landscape marked by uneven growth, regional disparities, and shifting demand patterns.