MILK MARKET UPDATE: Allocation? Newsletter No. 172 | 31 August 2026
"In a good year, the Alpine herdsman sells to everyone. In a bad year, he remembers who was loyal in the good year." Antoine the cheese artist, Gruyères, around 1680 a character of historical fiction who accompanies us in every good cheese cellar.
Review & Outlook
The effects of the dry, hot summer are seeping into the European market at different speeds. In the UK, prices for young Cheddar are rising and now stand around £0.20/kg above German prices. But in continental Europe, too, cheap spot milk has disappeared: anyone looking for milk today pays a premium – the other products will follow.
From November, Oceania decides. In its August update, NOAA raised the probability of a very strong El Niño for autumn/winter 2026/27 to over 90%, to around 95% for October to December – and for the first time puts a 69% chance on the event exceeding every El Niño since 1950. The probability of persistence until spring 2027 stands at 97%. New Zealand's new season starts right into it. Add the feed shortage: slaughter numbers are rising, and slaughtered cows give no milk in 2027 either.
Our recommendation, unchanged from last week
Close autumn gaps now, not next week. Nov./Dec.: secure the majority of volumes at today's conditions. Q1 2027: a first solid tranche now, the rest with the NZ data in October. The rationale: if New Zealand tips, today's prices are the lowest until well into 2027. If it delivers against expectations, New Zealand powder will not fill Europe's cheese gap anyway. Even though the EU price advantage in SMP over the US has melted away, this changes nothing in the calculation: if Oceania tips, the world market pulls both sides with it.
Our calls, measured (as of week 35)
13.07.: "Buy" — Edam 3.05 → 3.395 €/kg (+11.3%) · Gouda 3.12 → 3.405 (+9.1%) · Mozzarella 3.40 → 3.685 (+8.4%) · SMP 2,710 → 3,105 €/t (+14.6%) 27.07.: "Cover Q3 in full, tsunami thesis" — since then standard cheese +4 to +6%, SMP +12%.
Milk deliveries (week 33)
- Germany: −0.5% vs previous week, +2.5% vs previous year
- France: −1.2% vs previous week, −0.1% vs previous year
Germany: The main drivers are southern Germany, with drought-related poor forage supply and sharply rising cow slaughter (week 34: +17.5% vs previous year, after +36.4% the week before), plus persistently low milk solids.
Pulse Event 115: powders firmer, milkfat weaker
At Pulse Event 115, powders gained clearly: NZ SMP Medium Heat rose 7.80% to 3,595 USD/t, Arla SMP 4.32% to 3,505 USD/t, WMP Regular 2.85% to 3,610 USD/t. Milkfat, by contrast, gave way: unsalted butter fell 1.82% to 5,135 USD/t, AMF Premium lost 6.54% to 5,930 USD/t.
Futures: Europe and New Zealand firmer, US weaker
The EEX gained clearly over the week (SMP +2.55%, butter +0.92%, whey +5.84%), as did the SGX (SMP +2.05%). The CME mostly declined (butter −2.37%, cheese −1.22%). Since year-end 2025, SMP leads the tally: +50% EEX, +43% SGX, +52% CME. Spot whey on the EEX +48%.
France: production and sales
France's dairy exports developed mostly upward in the first half-year on +2.8% milk deliveries; since May, however, volumes have stagnated. Notable: bulk milk +132.3% (Spain as the new main buyer with around 70% share), skimmed milk powder +27.8% (third countries: Egypt, Libya, Indonesia), condensed milk +32.3%, casein +29.2%. Cheese exports, by contrast, slightly declined (−0.4% to 339,907 t), while cheese imports rose 8.3% to 281,197 t – Germany lost 6.9%, while Italy, the Netherlands and Belgium gained. France's traditional butter import surplus fell by around 19,900 t.
UK: milk volume collapses – cheese prices pull away from the EU
British milk deliveries stand 4% below the previous year; drought, heat stress and bluetongue raise fears of worse for 2027, and October milk is already being paid at 40p (approx. 47 euro cents). Mild Cheddar quotes at £3,200, traders expect £3,800 by year-end.
UK foreign trade: June weak, YTD still positive
Exports fell 8.63% in June but remain at +2.12% YTD, carried by cheese (+15.4%), butter (+33.6%) and SMP (+31.9%).
USA: production grows despite record heat
Despite the warmest July since 1895, US milk production rose 2.3% to 8.80 million tonnes, almost entirely through herd growth (+2%), while yield per cow stagnated. The farm gate price eased to $21.10/cwt.
US–Canada: milk remains the core dispute
Trump has imposed 50% tariffs on Canadian exports worth C$28 billion; Canada responded in kind. At the centre stands Canada's border protection for milk. In our view, this protectionism is the wrong path: Canada protects a small industry and damages its large export industries in return – the smaller the country, the more important open borders are. Subsidies that compensate for competitive disadvantages, by contrast, are not protectionism but its opposite.
Rabobank: the 20 largest dairy companies 2025, Emmi included for the first time
Lactalis leads the ranking unchallenged, ahead of Nestlé and DFA. Arla rises to fourth place through the DMK merger, becoming Europe's largest dairy cooperative. New entrants are Magnum (the former Unilever ice cream business) – and, for the first time, Emmi at rank 19. Total revenue of the top 20 reached 267 billion USD in 2025 (+5.4%).
FrieslandCampina invests in whey
FrieslandCampina has renewed the milk intake and optimised whey processing in Gerkesklooster – the site now supplies whey in infant formula quality for further processing in Borculo. The large processors invest consistently where the margin lies: in the whey cascade.
A-ware acquires butter specialist LaBan Foods
Royal A-ware intends to acquire the Dutch butter specialities producer LaBan Foods (around €50 million revenue, 60 employees), deliberately broadening its portfolio. The acquisition is subject to approval by the competition authority ACM.
Cheese
- Flower Meadow cheese (raw milk/premium): rising into autumn.
- Standardised cheese (pasteurised): The market firms for the third week in a row. Edam, Gouda and Mozzarella continue to gain, mild Cheddar most strongly – UK demand is radiating onto the continent. Decisive: declining milk availability increasingly shapes production and allocation decisions; for short-term additional enquiries, no semi-hard cheese is available anymore.
- Volume cheese/decanter: Little supply, frozen goods only.
- Hi-Lo (high protein/low fat): Grana Padano stable; Switzerland up 9.6%, still 17% below the previous year.
Milk powders
- SMP: Rising for the ninth consecutive week, the highest level since summer 2022, driven by tight stocks. The EU price advantage over the US has practically disappeared in dollar terms – further upside therefore depends more on Oceania than on Europe. In whey powder, the gap between food and feed grades is narrowing.
- WPC80/WPI90: WPC80 stable in a market not yet back in full swing, WPI90 under pressure on low liquidity. Sports nutrition is increasingly switching to MPC and casein, which continue to rise in price – the gap is closing. In the US, the opposite picture: WPC80 weaker, WPI90 in strong demand.
Liquid markets
The seasonal decline in deliveries, persistent drought and concerns about a Shamonda-like virus in Northwest Europe are driving liquid prices. Skimmed milk concentrate reaches its second-highest level since summer 2022, raw milk is becoming more expensive in all regions – the spot market increasingly sits above contract milk prices. Anyone looking for milk today pays extra.
Milkfat
Cream rises to its highest level since week 11 and quotes above its butter equivalent – tight supply meets strong demand from the fresh segment. Butter remains stable for now thanks to high stocks; either cream corrects, or butter follows upward. With deliveries declining, the latter is more likely. AMF firmer on quiet trading.
Switzerland – asleep at the wheel?
Drought 2026: the consequences are yet to come
The PAS situation report (24.8.) shows missing cuts across Switzerland, idle pastures and winter feed already being used; the farmers' association estimates losses at no less than half a billion. Animal sales and early slaughters are underway; the economic phase only begins with winter feeding. For milk deliveries, this means: pressure until well into 2027.
In Switzerland, as in the UK, milk volume is collapsing. UK cheese prices are pulling away from the EU: mild Cheddar already quotes 10% above the EU quotation, and rising. One wonders whether Europe is merely later – or asleep at the wheel. And Switzerland?
Availability Q4: Swiss production is largely bound by fixed delivery rhythms; spot volumes remain tight. Those who need volume confirm early.
Price trends by quarter
Q3 2026 — rising
- Flower Meadow cheese: rising into autumn
- Gouda/semi-hard cheese: rising
- Mozzarella: rising
- Cagliata: rising
- Hi-Lo: rising
- SMP: moderately rising
- Butter: high stocks, rather neutral
- WPC80/WPI: WPC80 sideways, WPI90 under pressure, substitution by MPC/casein
- WMP: sideways to slightly firmer
Q4 2026 — rising (upgraded from "neutral to slightly bullish")
- Flower Meadow cheese: rising
- Gouda/semi-hard cheese: rising
- Mozzarella: rising
- Cagliata: rising
- Hi-Lo: rising
- SMP: moderately rising, producers largely contracted out
- Butter: neutral to firmer, cream leading the way
- WPC80/WPI: rising
- WMP: dependent on the NZ peak
Q1 2027 — rising; the extent depends on El Niño (focus Oceania)
- Flower Meadow cheese: rising
- Gouda/semi-hard cheese: rising
- Mozzarella: rising
- Cagliata: rising
- Hi-Lo: rising
- SMP: rising, provided stocks are drawn down
- Butter: rising, once the stock buffer tips
- Whey proteins: rising
- WMP: rising
Reasons and assumptions for rising prices
- Low farm gate milk prices in the EU.
- Higher costs for energy and fertiliser.
- Heat and drought in Central Europe: materialised — deliveries falling, milk solids low.
- High beef prices as a slaughter incentive — the current slaughter wave is depressing them short-term (waiting lists at slaughterhouses).
- Falling farm gate milk prices in New Zealand.
- El Niño: official — NOAA advisory with over 90% probability of a very strong event in autumn/winter 2026/27 (Oct.–Dec. around 95%), persistence until spring 2027 at 97%.
- El Niño heavy rains in South America (Nov./Dec.).
- The US cannot compensate for declines in other regions; rising US farm debt is slowing expansion.
- Demand: restocking from the Middle East from September, China at least stable.
- New: Rising cow slaughter in Europe — the herd reduction will have an effect until well into 2027.
- New: Swiss production is falling amid drastic payout differences (BO Milch/NZZ) — the structural consolidation among processors is beginning.
In July we named nine factors with one direction. Three have materialised or been officially confirmed, two have been added. The direction is the same.
Strategic outlook — strategy beats opportunism
European milk volume growth is slowing rapidly; the opportunists are the first who can no longer deliver: spot goods are the residual volume left over once regular customers have been served. Less and less is left over.
The old rule applies again: in surplus, everyone buys equally well; in scarcity, goods are allocated. Allocation follows relationships, not the daily price. A strategic supplier base is now the supply guarantee. Those who have one, plan. Those who don't, search.
We are on site for you – our trade fair presence
- SIAL, Paris: 17–21 October 2026
- Marca, Bologna: 13–14 January 2027
- Cibus, Parma: 4–6 May 2027
- Mondial, Tours: 12–14 September 2027
Treat yourself to a genuine Swiss Flower Meadow cheese made from raw milk. Not just a pleasure, but a piece of joy for the soul.
Kind regards, Affineur Walo
"What drives us: We secure the balance in the Swiss dairy market and deliver objective market information to all market participants, for everyone to verify."
This forecast is based on our market experience and does not constitute a definitive prediction. We accept no liability for accuracy or deviations.
