The latest Global Dairy Trade auction (Event 389) produced a broadly weaker outcome, with the GDT Price Index falling 1.6 % from the previous event. While Cheddar and anhydrous milk fat (AMF) recorded modest gains, key commodities such as butter, whole milk powder, and skim milk powder (SMP) posted declines.
Key Trends: Butter & SMP
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Butter: The weighted average price across all contract periods was USD 6,712/tonne, down roughly 3.0 % from the prior event. For individual contracts:
• Nov-25: 6,758 (–4.3 %)
• Dec-25: 6,701 (–3.7 %)
• Jan-26: 6,695 (–2.7 %)
• Feb-26: 6,740 (–1.5 %)
• Mar-26: 6,738 (–0.5 %) -
Skim Milk Powder (SMP): The average winning price was USD 2,599/tonne, modestly lower by 0.5 %. The contract-wise breakdown:
• Nov-25: 2,592 (–1.5 %)
• Dec-25: 2,584 (–1.2 %)
• Jan-26: 2,583 (–0.7 %)
• Feb-26: 2,660 (+1.8 %)
• Mar-26: 2,702 (+2.7 %)
These declines in butter and SMP contributed materially to the downward pressure on the broader index.
Underlying Trends Driving the Results
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Oversupply / Milk Output Strength
Dairy producers in major exporting regions, particularly Oceania, have continued to report robust milk volumes as seasonal yields recover. This elevated supply pressure softens the premium for fat- and protein-based products (butter, SMP). -
Shifts in Demand Mix
While demand for value-added and processed dairy (e.g., cheese, specialty fats) remains steady, commodity powders and butter face increased competition, especially in markets where buyers are price sensitive or sourcing alternate fats. -
Contract Term Structure
The near-term contract periods (Nov-25, Dec-25) saw steeper declines than further-out contracts, indicating that market participants expect some moderation or recovery later in the year. For example, SMP’s later contracts (Feb, Mar) recorded positive changes. -
Global Macro & Currency Pressures
Exchange rate fluctuations, freight costs, and input inflation (feed, energy) are also likely influencing bid-ask spreads and margins, especially for butter and SMP which carry high logistic and processing cost sensitivity. -
Segmental Divergence
Not all dairy segments moved in unison. Cheddar saw a gain of 0.8 % to USD 4,858/tonne, while AMF also gained, underscoring that more processed fat/protein segments retain some resilience.
Outlook: What to Expect for Butter & SMP Prices
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Butter: The near-term outlook is somewhat bearish, with limited upside unless supply tightens or demand from key importers (e.g. Middle East, China) revives strongly. However, because contract prices farther out showed relatively smaller declines, a mild rebound is possible in late 2025 if margin pressures intensify. The decline in recent months (butter index down ~10 % from its peaks) suggests a correction from overextended levels.
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SMP: Given the modest drop this event and signs of stabilization in the mid-term contracts (Feb, Mar), SMP may see a more stable trajectory. Unless global demand weakens further or powder markets become saturated, SMP could outperform butter in the near term, supported by steady feed demand, animal nutrition use, and industrial consumption.
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Risks & Tailwinds: A potential swing factor is weather or seasonal milk yield volatility (drought, feed shortages), which could tighten milk solids supply. On the demand side, economic slowdowns or trade disruptions might dampen bids in importing regions.
In summary, while Event 389 delivered weakness in butter and SMP, the contract-by-contract results hint at a market bracing for more balanced conditions ahead. Butter appears more vulnerable in the short run, while SMP may find firmer footing if demand remains stable and supply moderation emerges.
Sources : Dairynews7x7 Oct 8th 2025 Global Dairy Trade release and multiple sources