Butter holds €7k+ as Oceania WMP surges 2.6% – global dairy splits widen while China’s farmgate prices tank 11.4%.

EXECUTIVE SUMMARY: Global dairy markets fractured last week with European futures easing (butter -0.9%, SMP -0.4%) against SGX rallies (WMP +2.6%). Physical EU prices hover near historic highs despite minor SMP/whey dips, while China’s farmgate milk prices sank to 11.4% below 2024 levels. Supply signals diverged – Fonterra’s NZ collections inched up 0.4% as Italy’s output fell 1.1% (solids stable). The US cash market surged 2%+ across cheeses, but converging Class III/IV futures signal June price headaches for fluid producers.

KEY TAKEAWAYS

• Oceania strength: SGX WMP futures jumped 2.6% to $3,951/MT ahead of constrained GDT volumes
• EU paradox: Butter holds €7,457 (-0% WoW) as SMP slips to €2,380 (-1.3%) despite tighter regional supply
• China’s disconnect: Farmgate prices at 3.07¥/kg (-11.4% YoY) clash with firm import activity
• US policy pivot: Class III/IV futures parity threatens fluid milk revenues under new June pricing formula
• Supply splits: NZ milk +0.4% vs Italy’s -1.1% (liquid)/+0.2% (solids) highlights component-driven markets

The global dairy market this past week? Complex would be an understatement. We’re seeing some fascinating divergences between regions that have me scratching my head a bit. European futures markets showed minor weakness in some areas while Oceania markets displayed surprising strength-particularly in WMP. I’ve been tracking these markets for years, and these regional disconnects are becoming more pronounced lately.

Physical prices across Europe remain historically high compared to last year’s levels despite some weekly corrections. Though if I’m being honest, these corrections are pretty minor in the grand scheme of things. The upcoming GDT Trading Event 379 tomorrow will be worth watching closely-especially with those seasonal constraints affecting Fonterra’s WMP volumes.

Futures Markets: A Tale of Two Exchanges

EEX Shows Signs of Caution

Trading on EEX was somewhat unremarkable last week with just 2,840 tonnes changing hands. Most of that-about 2,165 tonnes-was SMP, while butter accounted for only 675 tonnes. Monday was unusually busy though, with 2,115 tonnes traded that day alone. Not sure what prompted that Monday surge, but it represented about three-quarters of the week’s activity.

Price movements weren’t exactly dramatic. The butter futures strip for May-December 2025 averaged €7,236, down a modest 0.9% from the previous week. Nothing to panic about, but perhaps signaling that traders are getting a bit wary of these elevated levels. SMP futures for the same period eased back by 0.4% to €2,443. Again, hardly earth-shattering.

Whey futures, interestingly enough, went against the grain. The May-December strip gained 1.4% to reach €923. I find this particularly noteworthy because it contrasts with both the other EEX contracts and what we’re seeing in the physical whey market. Seems like futures traders know something about whey that the spot market hasn’t caught onto yet.

SGX Paints a Different Picture

Over on SGX, trading was more active with 5,356 lots traded. WMP dominated here-not surprising given Oceania’s production focus-with 3,415 lots. The rest was split between AMF (767 lots), SMP (626 lots), and butter (548 lots). The NZX milk price futures saw some action too, with 223 lots traded.

The price story on SGX was almost entirely positive, quite unlike EEX. WMP futures across May-December 2025 jumped a healthy 2.6% to reach $3,951. That’s a pretty significant move and supports what we saw in the recent GDT Pulse auction, where WMP hit $4,195. SMP futures also strengthened, though more modestly, gaining 0.7% to reach $2,909.

The fat complex was mixed-AMF futures rose 0.7% to $6,880, while butter futures slipped slightly by 0.4% to $6,809. I’ve always found it fascinating how these regional price disparities persist. European butter continues to command a substantial premium over Oceania butter, while conversely, Oceania SMP trades at a significant premium to European SMP. These persistent gaps really do highlight the regional nature of dairy despite all our talk of “global” markets.

European Physical Markets: High But Easing

Mixed Signals in Commodity Quotations

Looking at European physical prices from April 30th, they’re still running well above historical norms, though several products took a minor step back this week.

Butter was the standout, simply refusing to budge from its lofty perch at €7,457. National quotes also held firm-Dutch butter at €7,300, German at €7,325, and French maintaining its typical premium at €7,746. I remember when butter was struggling to break €4,000 not that long ago, so the current level-27.6% above last year-is pretty remarkable.

SMP, on the other hand, slipped €32 (1.3%) to €2,380. This decline was fairly consistent across the major producers: German SMP down €35 to €2,390, French SMP down €30 to €2,380, and Dutch SMP down €30 to €2,370. Unlike other products, SMP is barely above year-ago levels-just €8 or 0.3% higher. It’s almost like SMP exists in a different market entirely compared to the other commodities.

Whey decreased €8 (0.9%) to €855, with German whey falling €10 to €845 and Dutch whey dropping €20 to €840. French whey actually gained €5 to reach €880, which seems slightly odd given the overall trend. Despite this weekly dip, whey remains an impressive 33.2% above last year’s prices. I’ve been saying for a while that whey has been undervalued historically-perhaps the market is finally recognizing its true worth.

WMP showed minimal movement, with the EU WMP Index decreasing just €3 (0.1%) to €4,403. German WMP eased €10 to €4,390, while Dutch and French prices held at €4,300 and €4,520 respectively. Year-on-year, WMP is up €767 or 21.1%-another indicator of just how much the market has tightened over the past 12 months.

Cheese Markets Follow the Softening Trend

European cheese indices, reported by EEX, largely tracked the softening seen in powders:

Cheddar Curd fell €41 (0.9%) to €4,676, though it remains 14.9% above last year. Mild Cheddar dipped €19 (0.4%) to €4,713, sitting 15.6% higher than a year ago. Young Gouda decreased €45 (1.0%) to €4,307, still 12.3% above last year’s level.

Mozzarella was the exception, gaining a token €2 to reach €4,210, positioning it 17.0% above last year. I’m not entirely sure why Mozzarella bucked the trend-perhaps there’s some specific demand factor at play there.

These modest declines across most cheese varieties align with what we’re seeing in other European dairy products. It’s a mild softening-nothing dramatic-but noticeable across multiple products. I wouldn’t read too much into this yet, but it bears watching.

GDT Developments: All Eyes on Tomorrow’s Event

Fonterra’s Volume Strategy for TE379

Fonterra has confirmed its volumes for tomorrow’s GDT auction (TE379), and there are some interesting adjustments relative to the previous event:

WMP offered volume is set at 7,112 tonnes, representing a 3.4% decrease compared to the previous auction. Fonterra explicitly noted that “maximum offer quantities for Instant WMP are restricted until December 2025 due to seasonal constraints.” This supply limitation might explain some of the strength we’re seeing in SGX WMP futures.

SMP volume is almost unchanged at 2,260 tonnes-up just 1.1% from the last auction. Cheddar will see a more notable increase of 19.4%, with 370 tonnes on offer. I’m a bit surprised by that jump in Cheddar availability, to be honest. AMF offered volume stands at 2,130 tonnes, down 2.3% from the previous event, while butter volume is essentially unchanged at 1,008 tonnes.

The Cream Group will see a 3.7% reduction to 2,900 tonnes. Fonterra’s maintaining its 12-month forecast unchanged at 106,135 tonnes, suggesting they expect stability in the medium term.

Recent GDT Pulse Shows Encouraging Signs

The most recent GDT Pulse auction (PA078) provided some encouraging price signals ahead of tomorrow’s main event. Fonterra Regular C2 WMP sold at $4,195, while Medium Heat SMP achieved $2,895. A total of 1,739 tonnes were sold with 41 bidders participating.

That WMP price is particularly strong-exceeding the average SGX WMP futures price for the week ($3,951). It confirms there’s genuine tightness in the Oceania WMP market right now. I’m curious to see if tomorrow’s GDT event will sustain these levels given Fonterra’s strategic shift in volume allocation.

Supply Developments: A Complicated Picture

Oceania Continues Modest Growth

Fonterra’s March milk collections in New Zealand reached 134.9 million kgMS, up just 0.4% from March 2024. There’s an interesting regional divide here-South Island collections grew by 2.0% to 66.6M kgMS, while North Island collections fell 1.2% to 68.2M kgMS. Season-to-date collections are running at 1,316.8 million kgMS, up a healthier 2.6% over last season.

In Australia, Fonterra reported March collections of 8.7 million kgMS, up 2.0% year-on-year. Season-to-date collections total 84.5 million kgMS, running 1.4% ahead of last season.

These aren’t dramatic growth numbers by any means, but they’re positive. I think the modest nature of this growth helps explain why we’re not seeing any significant easing in global prices-supply is growing, but not enough to dramatically change the supply-demand balance.

European Production Shows Interesting Nuances

Italian milk deliveries for March were reported at 1.20 million tonnes, down 1.1% from last year. Cumulative production for Q1 stands at 3.37 million tonnes, also down 1.1% year-on-year. This volume decline would typically support higher prices, which aligns with what we’re seeing in the market.

But there’s a fascinating wrinkle here. While fluid volume is down, the components are up-milk fat was reported at 4.0% and protein at 3.47% for March. As a result, milk solid collections for March actually increased by 0.2% year-on-year to 89.4 thousand tonnes. Cumulative milk solid collections for January-March totaled 254.2 thousand tonnes, up 0.1% year-on-year.

This is a perfect example of why we need to look beyond just milk volume. Processors care about milk solids, not just fluid volume. I’ve always maintained that focusing solely on milk volume can be misleading-this Italian data proves that point rather nicely.

China’s Domestic Prices Remain Weak

The average farmgate milk price in China continued falling in April, reaching 3.07 Yuan/Kg (approximately €37.79 per 100Kg). That’s down 0.4% from March and a substantial 11.4% below April 2024.

These persistently low domestic prices in China puzzle me a bit. They typically signal pressure on local producers-perhaps weak domestic demand or internal oversupply. Yet we’re seeing strong import prices for products like WMP. There seems to be a disconnect between China’s domestic market conditions and their import activity. Maybe importers are building inventories despite weak immediate consumption? Or perhaps specific market segments are performing differently? It’s something worth watching closely.

US Market: Strength Amid Policy Changes

The US dairy market showed broad strength in cash trading last week. Cheese, butter, and whey cash prices all gained more than 2%, indicating robust immediate demand or tight spot supplies.

Futures markets largely followed suit, except for one notable exception-the six-month strip of butter futures didn’t match the cash market’s strength. This suggests traders are somewhat skeptical about the sustainability of current high butter prices over the medium term. I’ve seen this pattern before-immediate strength that futures traders don’t believe will last.

A significant development is the current relationship between Class III and Class IV milk futures, which are trading at roughly equivalent levels for the next six months. This timing is particularly important given the upcoming change to the Class I skim milk price calculation formula taking effect in June.

If these classes remain near parity, the new averaging mechanism will result in lower Class I prices compared to the current “higher-of” calculation. This could put pressure on dairy farmers focused on fluid markets. I’ve had concerns about this formula change since it was announced, and the current futures alignment suggests my concerns were justified.

Final Thoughts: Navigating Complexity

The global dairy landscape remains fascinatingly complex. Oceania markets are showing greater strength, particularly for WMP, while European markets remain historically firm despite some minor corrections. Butter continues to maintain its robust premium over other products-something I don’t see changing anytime soon given current consumption patterns.

For dairy producers looking at these markets, I’d suggest focusing on component production rather than just volume. The Italian data makes it clear-components matter more than mere volume. Processors increasingly prioritize cheese and high-value products, making protein and butterfat content ever more important to farm profitability.

As we move deeper into 2025, I think we’ll need to watch several key factors: China’s import appetite (despite those weak domestic prices), potential disease risks that could impact production, and ongoing trade tensions. Any one of these could significantly shift market dynamics.

Tomorrow’s GDT auction should provide some valuable signals about where we’re headed next. I’ll be watching WMP prices particularly closely given those seasonal supply constraints Fonterra mentioned. The current market feels cautiously optimistic, but as we all know, in dairy markets, that can change quickly.

Learn more:

• Weekly Dairy Market Recap April 28th, 2025: Fat Leads the Way While Powders Take a Breather
• Market Mayhem Reshapes Farm Profitability in 2025
• April 25, 2025: Butter Plunges While Cheese Barrels Rise

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