Lactose prices hold firm as trade and processing shift

Lactose prices reached peak values in 2025 and have remained firm relative to the broader dairy sector. The market has been increasingly shaped by processing economics and demand structure rather than by raw material availability alone. Demand proved resilient, supported by strong intra-EU trade flows and a notable increase in imports from China.According to DCA Market Intelligence, lactose benchmarks reached €1,175 per ton on December 18, remaining at stable levels compared to last month and with a significant 33.5% increase year-on-year (YoY). Lactose prices have reached their highest level in week 17 of 2025, when quotations peaked at €1,375 per ton. Since then, values have fluctuated but remain elevated, reflected in a yearly coefficient of variation of 12.6%. Since lactose is derived from the whey stream, its price dynamics tend to follow those of other whey-based products. This is reflected in the strong correlation (78%) between lactose and food-grade sweet whey powder (SWP). In 2025, SWP prices also increased and maintained higher levels than last year, rising by 6.3% for food and 9.7% for feed grade YoY. Lactose potential pool and processing constraints Lactose availability is structurally linked to the whey generated during cheese production. While additional flows come from permeate powders, sweet and acid whey, and casein processing, cheese-derived whey continues to be a big source of recoverable lactose in the EU.Using cheese output as a proxy for whey generation provides an estimate of the theoretical lactose pool. As of September, this potential pool increased by 1.08% YoY, supported by growth in France (+1.1%) and Poland (+3.8%), indicating a stable whey base capable of sustaining lactose output in 2025.However, this theoretical pool does not translate directly into lactose output, as processors allocate whey across several competing routes, including whey powder, permeate drying, WPC, WPI, and liquid applications. These allocation choices are increasingly constrained by capacity limitations across the wider dairy complex. The unexpected increase in milk availability has lifted the volume of products requiring drying. In Germany, higher milk inflows pushed total powder output to 530,275 tons as of September, up 5.2% YoY. Monthly data shows the intensity of this pressure, with powder production rising by 34.7% between August and September, largely driven by skimmed milk powder, which increased by 8.7% YoY and by 24.6% in August and 34.6% in September. As a result, the theoretical lactose pool represents an upper bound for production, while actual supply is determined by processors’ allocation decisions and the availability of processing capacity.Internal trade As of August, intra-EU lactose* trade reached 194,048 tons valued at €284 million, representing a 7.5% increase in volume and a remarkable 32.3% rise in value YoY. This reflects not only stronger trade flows but also a significant price increase. Average export values went from €1,191 per ton in 2024 to €1,465 per ton in August 2025.Exports expanded among the main suppliers, with Germany (+8.5%), the Netherlands (+4%), France (+42.1%), and Italy (+3.7%) all recording annual growth.Trade flows were mainly directed toward the principal intra-EU partners, with notable increases to the Netherlands (55,689 tons, +27.3%), Germany (35,953 tons, +51.5%), Ireland (28,521 tons, +56.5%), and France (22,369 tons, +21.5%).Diverse use streams support structural demand Lactose is utilized across a broad range of industrial applications, which promotes steady consumption. In pharmaceutical manufacturing, lactose is widely used as a filler and excipient, providing a stable and relatively inelastic demand base. Within dairy processing, it also functions as a standardizing carbohydrate in skimmed milk powder, linking its use directly to powder production and processors’ allocation decisions. Additional demand stems from food applications such as confectionery and bakery products, while lower-grade lactose and lactose-containing streams continue to be absorbed by the animal feed sector. Together, these uses support resilient internal demand and help explain the active redistribution of lactose observed across the EU.International trade The extra-EU exports totaled 154,953 tons as of August, valued at €271.7 million, a decline of 11.7% in volume but only a 1.9% decrease in value YoY. Exports fell in the Netherlands (–9.3% to 123,123 tons) and Germany (–8.3% to 102,406 tons). Yet, there was a substantial increase in France to 14,878 tons up 28.8% YoY, and in Italy (+3.5%).On the import side, activity also weakened. Lactose imports from outside the EU fell by 35% to 20,540 tons, largely driven by a sharp reduction in shipments from the United Kingdom, which still accounted for 96.4% of extra-EU supply. The contraction was most pronounced in the Netherlands (-72.1%), Germany (-38.9%), and Ireland (-36.7%). As a result, with falling imports and still sizable export volumes, the EU remained a net exporter of lactose.From a destination perspective, extra-EU demand weakened in key markets. Shipments declined to India (–25.5%), Japan (–10.6%), and New Zealand (–38.8%). China stood out as an exception, with imports rising by 66.1% YoY, offsetting the broader slowdown in external demand.Rising Chinese demand As of August 2025, China’s lactose imports from the EU rose from 20,890 tons to 34,705 tons. The increase was mainly driven by higher shipments from Germany, where volumes nearly doubled to 23,566 tons (+92.6%). France and Italy also expanded strongly, with exports reaching 3,805 tons (+315.7%) and 2,970 tons (+313.9%), respectively. By contrast, exports from the Netherlands declined by 44.2%, while shipments from Poland fell by 25.5%.Conclusion and Discussions Lactose prices reached its peak in 2025 and since remained firm. Despite the increase in milk availability, lactose supply has been shaped more by processing choices. This results in a market where theoretical availability appears sufficient, but effective production remains tight. Due to pressure on processing capacity, processors have increasingly prioritized higher-margin products such as skimmed milk powder and other dairy powders.Trade patterns highlighted a clear divergence between the EU internal market and external trade. Intra-EU lactose flows expanded alongside higher prices, underscoring the high level of market integration and the role of internal redistribution in balancing availability. Germany remained the core supplier within the bloc, while France strengthened its position across both internal and external markets. In contrast, extra-EU trade softened, with declining export volumes and sharply lower imports reinforcing the EU’s structural position as a net exporter and the secondary role of international markets relative to internal demand.China stood out as an exception to the softer global demand trend. Chinese imports of increased, supported by structural demand from pharmaceutical uses and the expansion of infant formula production across the Asia–Pacific region. Trade policy also influenced sourcing patterns, as temporary retaliatory duties on US dairy products reduced the price competitiveness of American lactose during part of the year. Although these measures were later removed, the tariff window coincided with a visible shift toward EU suppliers, benefiting Germany, France, and Italy and reinforcing China’s role as a strategic growth market for EU lactose exports.Overall, the lactose market has been shaped less by raw material availability and more by structural constraints within the dairy processing system. With effective supply limited by capacity and processors’ allocation choices, internal EU demand has continued to provide stability, while China has added incremental support on the export side. Looking ahead, as long as drying capacity remains constrained and higher-margin dairy streams retain priority, lactose availability is likely to remain under pressure, suggesting that prices may be influenced more by processing economics than by changes in milk supply alone.Footnote: *HS 17021100 & 17021900:Lactose in solid form and lactose syrup, not containing added flavoring or coloring matter, containing by weight = 99% lactose, expressed as anhydrous lactose, calculated on the dry matter.