Changing dynamics reshape the European milkfat market

The balance within the European milkfat complex is shifting. Cream's sharp recovery strengthened its position relative to butter during August, but easing fresh demand and stronger SMP prices are now changing the picture again. At the same time, high butter availability continues to weigh on the market, creating a more complex outlook for milkfat allocation and prices.According to DCA Market Intelligence, the milkfat complex remains significantly below last year's levels, despite recovering from earlier 2026 lows. On September 3, butter stood at €4,140 per ton (-36% YoY), cream at €5,105 (-30%) and AMF at €4,965 (-38%).Cream recorded the strongest recovery over the past month, increasing by 25%, compared with 5% for butter and AMF. Cream was also the most volatile, with a coefficient of variation of 35%, compared with 27% for butter and 28% for AMF, reflecting its greater sensitivity to milk availability.The recovery also shifted cream's relative value against butter. Tighter raw material availability and stronger fresh demand pushed cream above the theoretical butter value in August, reaching a premium of €327 per ton. However, this is starting to reverse as summer comes to an end. With fresh demand easing, cream declined while butter moved higher, narrowing the premium to around €56 per ton.Higher milkfat availability supports production Higher European milk collections increased milkfat availability by 4.7% YoY to 3.23 million tons in H1 2026. Supply increased across the main producing countries, including Germany (+6.6% to 713,074 tons), France (+3.5% to 522,423 tons), the Netherlands (+6.3% to 334,421 tons), Poland (+2.8%) and Ireland (+1.8%).Butter supply increased at a considerably faster pace than overall milkfat availability. Production rose by 8.8% YoY to 1.21 million tons in H1 2026. Germany grew by 11.5% to 298,990 tons, while Poland recorded a 19.9% increase to 163,810 tons. Production also expanded in France (+5.6% to 229,270 tons), Ireland (+8.9% to 151,000 tons) and the Netherlands (+7.8% to 61,753 tons), while Denmark declined by 6.1%.Meanwhile, cream production for direct consumption remained broadly stable at 1.32 million tons (-0.7% YoY). Together with stronger butter production, this suggests that more available milkfat was directed towards butter rather than cream for direct consumption. However, this does not imply lower overall cream availability, as cream is also traded as an intermediate product for further processing, including into butter.Butter and AMF strengthen international reach As of May, intra-EU butter trade increased by 8.5% YoY to 347,906 tons, with the Netherlands, Germany, Ireland, Belgium and Poland remaining the main suppliers. German shipments rose by 27.6% to 68,608 tons, while volumes from the Netherlands declined by 5% to 80,620 tons.Extra-EU exports grew considerably faster, rising by 36.2% to 129,591 tons. Irish shipments increased by 41.7% to 51,332 tons, while Germany and Poland also expanded strongly, by 166.4% and 308.6%, respectively. At the same time, extra-EU imports increased by 51.9% to 17,872 tons, driven mainly by the UK and New Zealand, but this volume remained small relative to exports.AMF showed a similar shift towards international markets. Intra-EU shipments increased by 9.1% to 59,941 tons, supported by higher volumes from France and Denmark. Extra-EU exports increased by 34.5% to 11,125 tons, with shipments from the Netherlands, France, Belgium and Poland all expanding. At the same time, extra-EU imports declined by 16.7% to 11,766 tons, strengthening the EU’s external position.Cream moved in the opposite direction. Intra-EU volumes increased by 7% to 395,743 tons, supported by stronger shipments from the Netherlands (+27.7%) and Germany (+35.9%), while extra-EU exports declined by 7.8% to 78,799 tons.Milkfat trade finds new international outlets Looking at where EU butter volumes were directed, intra-EU flows remained concentrated among major dairy-producing countries, including the Netherlands, Germany, France and Belgium. Outside the EU, the US was the main growth market, with shipments increasing by 42.1% to 31,757 tons, while the UK remained broadly stable at 19,916 tons. China also increased by 32.9% to 9,167 tons, while demand strengthened in smaller markets including Turkey, Morocco, Egypt and Saudi Arabia.Cream remained primarily within Europe, although flows shifted between markets. Shipments to Poland increased by 80.1% to 55,199 tons, alongside stronger Polish butter production, and to Italy by 45.9% to 30,357 tons. Volumes to the Netherlands declined by 42.9%. Outside the EU, China remained the main destination despite a 19.8% decline to 30,069 tons, while Saudi Arabia increased by 58.6% to 6,206 tons.AMF trade also expanded. Within the EU, Italy, Belgium, France and Germany were the main destinations, while volumes to the Netherlands increased by 91% to 3,936 tons. Outside the EU, Saudi Arabia increased by 82.9% to 1,627 tons, alongside growth in smaller Middle Eastern and Asian markets including Indonesia, Egypt, Lebanon and the Philippines.Discussion and conclusion The recent recovery in cream is changing the balance within the European milkfat complex. For most of the past year, cream traded below its theoretical butter equivalent. This coincided with strong butter production: EU output increased by around 111,000 tons YoY in H2 2025 and another 98,000 tons in H1 2026, representing 209,000 tons of additional production across the two periods.The processing economics started to shift in August, as stronger fresh demand and seasonally lower milk availability pushed cream above its theoretical butter value. However, this balance is already starting to reverse as fresh demand eases and stronger SMP prices support milk valorisation through both the SMP and cream and SMP and butter streams. This could keep milk separation attractive and support cream availability. For butter, this would keep production supported despite already high availability. Seasonal demand for fresh butter remains firm, while stronger exports are helping absorb some of the additional supply. However, existing stocks continue to contain prices. The market will therefore depend not only on milk availability and demand, but also on which valorisation stream provides processors with the strongest return.