Global dairy markets raise protein values as fats decline
Recent auction and futures-market activity showed a widening gap between the value of dairy proteins and fats. Protein-linked contracts held their closing values more firmly, while wholesale prices for fat-based products fell. The shift coincided with stronger demand for skimmed solids and nitrogen-based dairy fractions, alongside more cautious inventories among biscuit and confectionery manufacturers.
Milk supplies increased in several major exporting regions. July deliveries to processing plants rose by 11.4% year on year in Uruguay and by 3.2% in Argentina, while the United States recorded 2.2% growth in its dairy herd. European Union production was up 2.0% in the first half of the year. New Zealand began its dairy season with solid volumes, supported by initially favourable grazing conditions. China was the main exception among the large producers: national output fell by 2.9% in July amid technical adjustments at intensive farms.
The increase in production among leading Western exporters added to butter-fat availability. The report said this was filling cold-storage facilities and making it harder to sell butter at elevated prices. At the same time, the cost of holding fat inventories increased because of continued refrigeration requirements and maritime freight expenses.
China’s overall imports of dairy derivatives fell by 30.2%, according to customs data. Purchases of whole milk powder declined by 13%, as domestic inventories reduced demand for imported products. Global whole milk powder shipments nevertheless rose by 4% in volume, with additional demand coming from emerging South-East Asian economies and several countries in Central America and the Caribbean. International processors responded by expanding their customer base and directing more protein-based dairy products to markets seeking lower-cost ingredients for basic nutrition.
Processors also faced higher operating costs linked to drought, heatwaves and water stress in important livestock regions of South and North America. The report said that restrictions on raw-milk supplies would provide additional support for international protein prices if they occurred in the coming months. Dairy groups were increasing investment in membrane-fractionation lines designed to produce concentrated whey and protein hydrolysates with higher added value.
The difference between protein and fat values was reflected in payment schedules for dairy farmers. Pasteurising and cheese-making companies adjusted bonuses to favour farms supplying milk with higher casein and crude-protein concentrations, while reducing the traditional premium for butterfat. Farmers were consequently changing feed rations and adding protected amino-acid sources to improve protein synthesis in the rumen. Longer-term supply agreements were described as dependent on farms matching milking parameters with processors’ requirements.
