What do recent upwards market movements mean for dairy farmers?

We first saw this in New Zealand’s GDT auction, which has now seen five continuous positive price movements since the beginning of the year.

This was followed by an uplift in UK wholesale prices in SMP and cheddar in January and across the board in February.

Not huge movements, but recovery all the same.

But the milk is still growing strongly – January milk supplies were up by 3.7% and global milk supplies were still buoyant in December.

SMP – growing demand and tightening supply

Initially, this was believed to be driven by market sentiment. Buyers believe that the market is as low as it is going to get, so they have started buying again, particularly to cover short forward positions. This sparks a flurry of demand.

However, more fundamental issues have emerged.

Some demand has come from European prices becoming competitive against the Southern hemisphere, again sparking export demand.

The other driver is the emerging conflict in Iran. Iran was estimated to be the fourth largest exporter of SMP in 2025, according to Expana.

Major buyers include Pakistan, Iraq, the United Arab Emirates and Afghanistan. Estimates indicate Iran exported about 182,000 t of milk powder in 2025, up by 27% year over year and roughly 134,000 t more than in 2021.

Some of these buyers in the region and Southeast Asia may be looking elsewhere. Others may anticipate rising prices due to the anticipation of rising energy costs (SMP is an energy-intensive production process) and want to secure supply earlier. 

The SMP market in the USA genuinely is under-supplied in that they have focused their dairy production towards cheese, yogurt and whey (and expensive whey derivatives like WPC-80 and WPI) and less towards SMP and butter.

This has pushed prices up. Dryers in the UK and EU are reportedly full as well. 

Some product substitution has also emerged as whey prices have increased, increasing the demand for casein found in SMP instead.

Rising global consumer demand for products with a protein claim are increasing, which is pushing up demand for dairy proteins.

Other commodities may have followed suit.

However, fundamentally, the market still has too much milk, high inventory of products like butter, not enough demand and the spring flush is fast approaching. Processing capacity is already reportedly full. We cannot sell what we cannot process. 

What does this mean for farmers? 

Commodity values have recovered to a slight degree, which at least means market indicators like AMPE and MCVE have come back up slightly. AMPE rose to 32.8ppl, gaining 2.7ppl and MCVE rose to 32.7ppl, gaining 1.9ppl.

This means that the value of milk is now around 4% higher than last month. 

As milk prices are correlated with market indicators, they should stop falling and start to rise, however little, in two to three months' time. We have already seen the first positive GB milk price rise announced for April.

However, this could be a short-term reprieve. With milk supplies as they are, once buying sentiment settles, we may see commodity values follow suit. 

Or, the market could rally further, particularly as milk supplies tighten in response to lower prices. When they do, as they haven’t yet. 

At the same time, the geo-political situation in Iran and the wider Middle East will have far-reaching effects on both costs and markets.

At the moment, this is a watching brief and farmers need to continue to prepare for a period of lower margins.

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