EU Dairy Prices Rise as Protein Demand and Tighter Milk Outlook Reshape Markets

Dairy quotations climb from July lows

Key European dairy quotations have moved higher since the beginning of July, signalling firmer costs for processors and buyers even though several products remain cheaper than a year ago. La Repubblica reported that prices recorded at Kempten, Germany’s principal dairy marketplace, increased by 8% for butter, 18% for skimmed milk powder, 27% for whole milk powder, 1% for Edamer and 6% for whey powder.

The gains have not erased the weakness accumulated over the previous year. Butter remains 34% below its year-earlier level, while whole milk powder is down 5% and Edamer is 20% lower. The market is much stronger for protein-oriented ingredients: skimmed milk powder is 40% above a year ago and whey powder is up 75%, according to La Repubblica, supported by record global demand for protein.

That divergence matters for dairy processors. Manufacturers focused on whey and skimmed milk powder have gained stronger pricing support, while butter and cheese suppliers are recovering from a substantially lower base. Buyers of nutritional, sports-food and other protein ingredients face a tighter market than users of milk fat or Edamer. German spot milk quoted in Milan has also risen 17% since July, increasing the immediate raw-material pressure on processors buying outside longer-term supply contracts.

Milk supply growth is expected to reverse

EU milk deliveries grew 3.4% in the first half compared with the first half of 2025, but the direction is now changing. Heat, input costs and geopolitical uncertainty are limiting supply, La Repubblica reported. Areté expects EU milk production growth to slow from 1.7% in 2025 to 0.9% in 2026, followed by a 0.6% decline in 2027.

The forecast helps explain why quotations can rise despite year-on-year discounts in butter, whole milk powder and Edamer. Slower production growth reduces the volume available for processing just as demand for protein-rich products remains strong. If the projected contraction materialises in 2027, processors may have to compete more actively for milk, while producers will weigh higher product prices against heat exposure and elevated operating costs. For traders, the sharp differences between fats, cheese and protein ingredients make product mix and contract timing increasingly important.

Soybean prices rise as demand absorbs supply

Soybean markets are tightening alongside the dairy recovery. In the first half of September, Chicago quotations gained more than 8%, while export prices in Brazil and Argentina rose by more than 9%. La Repubblica attributed the move to renewed Chinese purchasing and strong demand in the United States.

The US Department of Agriculture expects a record harvest, but it also projects stronger exports and lower ending stocks of 8.4 million tonnes. The combination means that a large crop does not necessarily translate into abundant carryover. For livestock and dairy operators, higher soybean prices can raise feed costs at a time when heat and other inputs are already constraining European milk supply.

Europe’s own soybean outlook offers little relief. The European Commission forecasts EU production of 2.2 million tonnes in the 2026/27 season, down 21% year on year, with Italy’s output falling 25%. Attention is therefore shifting to Brazil, where planting has just begun. Rainfall will determine the prospects for the new crop and could influence international prices, Chinese procurement and feed costs for importing markets.