Dairy Prices in 2026: What’s Pulling Butter, Cheese, Powder and Protein Apart?

Butter and SMP prices diverge, EU butter trades 37% below its 2025 average; EU skimmed milk powder (SMP) is 44% above it.

In a recent Expana webinar, Sandro Schulz, EMEA Protein Team Lead, and Brittany Feyh, US Dairy Market Reporter, explained what is driving that split across Europe and the US, and the role whey protein plays.

Milk Supply Is Strong, but Growth Is Slowing

EU milk collections rose 3.9% year on year in the first half, though growth cooled from 5.2% in January and February to 2.6% in June as summer heat stress set in. US production rose 2.5% from January to August, driven by a 30-year high in herd size feeding milk to new and expanding cheese plants, but August growth of 1.7% was the weakest this year so far.

German spot milk recovered from its April low to €420/mt in September, level with its 2025 average. In the US, Class III milk (cheese and whey) is 11% below its 2025 average, while Class IV (butter and powders) is 39% above, lifted by nonfat dry milk demand and price surge.

Why Fat and Cheese Are Falling While Powders Climb

Europe

Strong SMP demand from Southeast Asia, and from markets usually supplied by the US, has pulled milk into the butter and SMP stream. SMP output rose 12.9% in the first half and butter output 9%, but butter demand has not kept pace. Heavy frozen stocks from 2025 leave butter at €4,000/mt.

Gouda and mozzarella are 8.5% and 6.9% below their 2025 averages. Schulz described cheese as increasingly a byproduct of the whey protein complex: high whey values keep cheese output high regardless of cheese demand.

United States

US butter is 26% below its 2025 average at $1.37/lb, weighed down by high milk components, rising output and weak domestic demand, partly linked to GLP-1 medication usage. Nonfat dry milk (NFDM) continues to move in the opposite direction, rising quickly just after hitting record highs this year, it sits at $2.10/lb, 72% above its 2025 average, with stocks 5% lower despite 6.7% more production.

Is Whey Protein Demand Meeting Resistance?

Protein has moved beyond gym products into everyday foods like bread, drinks and snacks. WPC80 has more than doubled against its 2025 average, reaching €23,995/mt in the EU and $13.00/lb in the US earlier this summer, while EU milk protein concentrate (MPC) is up 71%.

Since early summer, WPC80 and isolate prices have levelled off. Industry sources report more blending with MPC or plant proteins such as pea and soy, and new US capacity is easing stocks.

The speakers differed here. “Everybody wants to keep the whey. So what do we do with the cheese? We export it,” said Feyh. Schulz expects processors to keep weighing the cheese and whey stream against butter and SMP rather than follow whey alone.

How Trade Is Rebalancing US and European Prices

From January to July:

• US butterfat exports rose 66.5% and cheese 23.3%, while NFDM exports fell 6.3%, led lower by Mexico.
• EU butterfat exports rose 38.1%, cheese 6.0% and SMP 16.1%, with Indonesia, Singapore and Thailand offsetting weaker Algeria and China.

Price explains the flows. US butter is the cheapest origin at $3,207/mt, against $4,643/mt in the EU. Oceania is now the cheapest origin for SMP and whole milk powder.

Beyond the EU and US, a strong start to the New Zealand season is pushing surplus milk into whole milk powder, building stocks across Oceania. Industry sources report softer Chinese appetite for milk powders as domestic production stabilizes. In Algeria, a key market for EU SMP, European suppliers face growing tender competition from Belarusian and Russian product.

What Buyers Are Reporting Into Year-End

• Price resistance: Mexico is stepping back from US NFDM, while European SMP buyers plan for Ramadan coverage.
• Earlier contracting: Q1 negotiations have started sooner than usual, with uncertainty driving contact demand.
• Ingredient selection: protein blends and substitutions are under active discussion.
• Christmas demand: seasonal pull on butterfat and cream, after 2025 saw limited year-end buying surge.

Costs are rising underneath. European electricity prices are at their highest since 2022, container rates remain elevated at around $4,473 per 40ft unit, and rising wheat prices add to feed costs on dairy farms. With heat-stressed silage in the mix, winter milk supply is the biggest open question. “Don’t ignore the milk supply because we had a good first half of the year,” said Schulz.

“Protein, protein, protein is the theme,” as Feyh put it. For dairy buyers, protein is now the place to start reading the market. Watch the full webinar on demand for the complete session and Q&A.

This commentary is prepared by Expana and its group of companies, neither of which is an investment firm. We have no positions in the commodities or derivatives referenced. The views expressed are for information only. See our disclaimer for more information: https://www.expanamarkets.com/disclaimer/