Investments in cheese and whey processing are reshaping the dairy market and affecting prices. According to the Dairy Report, the shift in milk allocation towards protein products is putting pressure on traditional categories, particularly butter.

Significant investment in cheese and whey is reshaping the way milk is used and how value is generated within the sector. The growth in milk production and its shift towards protein products have led to a build-up of butter stocks, increased volatility and falling prices, despite a recent partial recovery.

Cheese is more resilient to price fluctuations, whilst whey has become a key driver of value due to demand for protein and higher margins.

Pressure on butter prices

Over the past year, butter prices have come under significant pressure. High milk production volumes are forcing processors to channel raw materials into long-life products, leading to a build-up of stocks and a fall in prices.

In key exporting countries, butter prices fell by double-digit percentages year-on-year. Signs of recovery only emerged in March, when prices in Oceania, the US, and the EU began to rise.

However, further investment in cheese and whey could once again exacerbate instability in this sector.

The redistribution of milk and the new market structure

According to Jasper Endlich, an analyst at Vesper, the increase in the volume of milk used for cheese and whey production will affect the market balance.

“An increase in the volume of milk used for cheese and whey production will lead to a reduction in the volume of milk used for butter and milk powder production, except in cases of a significant surplus,” he noted.

Cheese remains a profitable segment, continuing to grow in both volume and value against a backdrop of rising global consumption.

Whey as a key driver

Whey is increasingly regarded as one of the most valuable components of the dairy market. High-quality whey protein concentrates (WPC) help to sustain milk prices and stimulate investment.

According to Endlich: “High WPC prices are creating better opportunities to increase the value of milk protein.”

According to data from DCA Market Intelligence, the price of standard whey powder has risen by more than 50% since January—to €1,700 per tonne—while highly concentrated products have reached around €20,000 per tonne over the course of the year.

High demand coupled with limited production capacity is keeping prices up, but at the same time limiting the scope for increasing supply.

Investment and shifts in the global balance

The growing demand for protein is driving an expansion of production capacity, particularly in the US, where plants are being actively modernised and new dairy-producing regions are being developed.

Europe and New Zealand are also planning to expand, albeit on a smaller scale. The US is expected to strengthen its position as the largest exporter, whilst China will remain a key importer.

At the same time, investment is shifting towards highly concentrated ingredients such as WPC80, which is altering the balance between different types of whey products.

A key driver of growth is the so-called ‘clear whey’, which is widely used in beverages and sports nutrition due to its functional properties.

In the long term, the shift in milk consumption towards protein-based products may leave traditional categories, particularly butter, more vulnerable to price fluctuations.

Source: Dairy Report