EU Skimmed Milk Powder remains competitive in a volatile global market

EU SMP benchmarks recovered steadily at the start of 2026, supported by competitive pricing and lower volatility compared with other major exporters, although prices remain below year-earlier levels. Production expanded faster than milk supply in key producing countries, reflecting a strategic reallocation toward powder and increasing market availability. Despite weaker trade with Algeria, EU exports grew strongly, with higher shipments to the Middle East and Southeast Asia offsetting regional disruptions.1. Benchmark OverviewDCA benchmarks for Skim Milk Powder (SMP) closed at €2,365 per ton in week 7 (February 12), for both food-grade and feed-grade products. Food-grade SMP remained broadly stable compared to the previous week, declining slightly by 0.4%, while feed-grade SMP strengthened by 1.3%. Despite the short-term volatility observed in recent Global Dairy Trade events, the broader price trend has remained positive over the last few weeks.On a monthly basis, food-grade prices increased by 14%, while feed-grade SMP rose by 15.6%, reflecting a recovery from the low levels observed toward the end of 2024. Nonetheless, prices remain below year-earlier levels, with food-grade SMP down 4.4% year on year and feed-grade prices 2.1% lower.In a global context, EU-sourced SMP has remained competitively priced throughout 2025 year to date, trading below comparable products from the United States and New Zealand in ten out of twelve months. This positioning supported an earlier price recovery and contributed to lower volatility compared with other major exporting regions.2. SMP production growth outpaced milk production growth in key producing countriesSMP output in the EU expanded by 7% year on year to 1.35 million tons as of November 2025. Ireland and Germany led the expansion, where SMP production expanded by 35.1% and 36.2%, respectively. At the same time, milk production increased at a more moderate pace, rising by 4.8% in Ireland and 0.9% in Germany.The gap between milk and SMP production indicates that the expansion in SMP supply was not driven by higher raw milk availability alone. Instead, a larger share of milk was allocated toward powder production. Poland showed a contrasting pattern, with SMP output declining by 4.8% year on year to 144,400 tons as of November, despite a 3% increase in milk production.This underlines that processor allocation decisions play an important role in shaping SMP supply, rather than milk availability alone. Allocation into the SMP-butter production stream can also serve as a safety valve, as both products have a long shelf life. As such, the elevated surge in SMP production could also signal stress in the market, particularly considering the low prices observed across most dairy commodities by the end of 2025.3. Exports expanded despite weaker trade with AlgeriaIn 2025, EU SMP production was strongly oriented toward international markets. Extra-EU exports reached 798,463 tons year to date as of November, exceeding intra-EU trade volumes and marking an expansion of 11.7% compared with the previous year. This growth occurred despite a pronounced contraction in shipments to Algeria, which dropped 19.7% compared to the previous year.Export growth was driven by strong demand from alternative destinations, particularly in the Middle East and Southeast Asia. Shipments to Saudi Arabia increased by 64.5%, while exports to Indonesia rose by 76.1%, offsetting weaker demand from Algeria. Within the EU, export expansion was driven again by Germany (+42.2%) and Ireland (+41%), while Polish exports declined by 11.8%, due to Poland’s higher reliance on the Algerian market.Overall, the EU was able to redirect SMP flows toward alternative destinations, mitigating the impact of a reduced demand from its most important destination market.4. Algerian SMP import contraction reflected policy intervention rather than demand erosionIn Algeria, the imports decline in 2025 was likely driven by policy intervention rather than a structural weakening in demand. Algeria launched its National Dairy Program aimed at increasing domestic self-sufficiency, supported by large-scale investments in local milk and milk powder production capacity, such as the establishment of the largest dairy farm in the world by an Algerian public-Qatari private partnership. This signals the Algerian intention to reduce reliance on imported dairy products in the medium term. Moreover, Algeria has also diversified its provision of cheaper SMP from other countries, such as Belarus, which could underline the country’s connection with Belarus and Russia.Moreover, the Algerian government imposed a temporary freeze on powdered milk imports, affecting both SMP and WMP flows from all origins. This measure constrained import volumes and disrupted normal trade patterns, contributing to reported shortages in the domestic market. By September 2025, the restrictions were partially lifted through exemptions granted to selected buyers, indicating a gradual reopening rather than a full normalization of imports.Market contributors reported that Algerian buying interest in SMP was strong early in 2026 and was viewed as a supportive factor for EU pricing.5. SMP market mechanisms and interactionsOn the supply side, SMP output increased faster than milk production in several key producing countries, underscoring the reallocation of milk toward powder manufacturing. This raised SMP availability at a time when prices were recovering from the lows observed in the previous year.On the demand side, intra-EU trade softened slightly, with volumes totaling 566,708 tons year to date as of November, down 0.6% year on year. Higher local SMP availability in countries such as Germany and the Netherlands reduced the need for internal sourcing. At the same time, international markets absorbed a growing share of EU production, supported by the EU’s competitive pricing relative to the United States and New Zealand.Policy developments in Algeria temporarily disrupted trade flows, redirecting volumes toward alternative destinations. This adjustment was facilitated by strong demand growth in parts of the MENA region and Southeast Asia. Together, these interacting factors contributed to a more balanced market environment, supporting EU SMP prices despite regional disruptions and ongoing volatility in global dairy markets.6. ImplicationsThe SMP pricing was increasingly influenced by processing decisions and trade flexibility, alongside milk production fundamentals in 2025. The recovery observed in EU SMP benchmarks highlighted the sector’s capacity to funnel the higher output to diverse export markets, supported by its competitive pricing to other global producers. A silver lining to the strong price pressure observed last year.At the same time, developments in Algeria resulted in distorted trade flows and complicated the interpretation of demand signals. While import volumes declined, contributor sentiment reflected that interest in SMP remained.Lower price volatility in the EU compared with other exporting regions points to a strong resilience of the EU SMP market. However, the combination of expanding production capacity and exposure to policy-driven trade risks continues to shape market perceptions. As a result, SMP pricing in 2026 remains sensitive to shifts in export accessibility, processor allocation strategies, and regulatory developments in key importing countries. Moreover, the SMP market remains more globally integrated than other dairy products, resulting in a stronger influence from global signals.7. ConclusionThe EU SMP market in 2025 has been characterized by recovering prices, expanding production, and resilient export performance within a changing global environment. While policy developments in key import markets warrant close attention, competitive positioning and diversified trade flows have supported market stability. Ongoing monitoring of benchmark movements, production trends, and international trade dynamics remains essential. Further updates are available through the DCA Market Intelligence platform.8. Methodological considerationsThis analysis is based on DCA Market Intelligence SMP benchmarks and related milk powders, compiled under established PRA methodologies. DCA benchmarks reflect independently assessed price levels derived from verified market inputs.The DCA Market Report provides context and understanding to benchmark movements. It is not a forecast, nor a trading recommendation, or full market study. Access DCA Market Intelligence’s platform for continuous benchmark monitoring, historical price series, and additional market indicators.9. Additional referencesComext databaseGEA mandated to build world’s largest integrated dairy facility in Algeria Algiers resumes powdered milk imports | APAnews - African Press Agency