Strong protein demand pushes SMP prices higher, while butterfat and cheese markets remain under pressure
Skim milk powder (SMP) has emerged as the strongest performer in the latest Global Dairy Trade (GDT) auction, helping lift the overall dairy price index by 0.9% despite increasing seasonal milk supplies across major producing regions.
SMP prices increased 5.3% across all contract periods during the latest auction, following a 7.6% rise at the previous GDT event. The consecutive gains have pushed the SMP index to US$3,665 per tonne, placing it US$110 above the whole milk powder (WMP) price of US$3,555 per tonne.
The current SMP price is its highest level since September 2022, highlighting the strength of demand for milk proteins in global dairy markets.
Protein demand supports skim milk powder prices
The unusual situation of SMP trading above WMP has drawn attention across the dairy sector. WMP contains both milk protein and milkfat, meaning it would typically command a premium over skim milk powder.
However, stronger demand for milk protein has provided significant price support to SMP. The latest auction demonstrates the increasingly divergent performance between protein-based dairy products and milkfat products.
NZX head of dairy insights Cristina Alvarado said the GDT market delivered a more resilient result than might have been expected given the increase in seasonal milk supplies.
According to Alvarado, milk powder demand remained firm, while declines in milkfat prices were more contained compared with the previous auction.
Milkfat and cheese markets face pressure
While SMP recorded strong gains, several other major dairy commodities moved lower during the latest auction.
Anhydrous milk fat (AMF) prices declined by 1.3%, while butter prices fell by 0.8%. Cheddar recorded a significantly larger decline of 6.6%, while WMP slipped 0.1%.
| Dairy Product | Latest Price Movement |
|---|---|
| Skim Milk Powder | +5.3% |
| Anhydrous Milk Fat | -1.3% |
| Butter | -0.8% |
| Cheddar | -6.6% |
| Whole Milk Powder | -0.1% |
| Overall GDT Price Index | +0.9% |
The contrasting movements point to a widening gap between demand for dairy proteins and demand for milkfat and cheese products.
Global milk supply continues to increase
The latest GDT performance comes as milk production increases across several major dairy-producing regions.
According to the August Global Dairy Update, milk production increased during May, June and July in New Zealand, Australia, Europe and the United States.
Higher seasonal milk availability would normally be expected to place downward pressure on dairy commodity prices. However, the continued strength of milk powder demand has provided support to the market.
The resilience of powder prices could become increasingly important as Northern Hemisphere milk production responds to the effects of recent heatwaves and drought conditions.
Diverging dairy market creates mixed outlook
The latest GDT auction reinforces what market analysts describe as an increasingly divergent global dairy market.
Protein products are benefiting from firm demand even as powder availability increases. At the same time, milkfat products remain under pressure, while cheese is facing a heavier supply burden.
For dairy processors and farmers, these differences are important because the relative value of milk components can influence farmgate milk prices, processing margins and production decisions.
The strength of SMP also reflects broader demand for dairy proteins, which are widely used across food, beverage and nutrition applications. Continued protein demand could therefore remain a key factor supporting international dairy commodity prices.
Next GDT auction scheduled for September
The next Global Dairy Trade event is scheduled for September 14–15. Market participants will be watching whether SMP can maintain its recent momentum and whether the gap between protein and milkfat prices widens further.
Fonterra’s annual results are scheduled for September 24. The company is expected to provide an update on its farmgate milk price forecast for the current season.
With global milk supplies rising and commodity performance increasingly split between proteins, fats and cheese, upcoming GDT auctions will provide important signals for the direction of international dairy markets.
