Whey boom in summary:
- Whey protein prices have surged to record highs, reaching around $11/lb
- Demand from fitness consumers and GLP‑1 users is reshaping dairy economics
- Cheese producers are increasingly earning more from whey than cheese itself
- Billions are being invested globally to expand whey and dairy processing capacity
- Analysts warn whey-led expansion could increase cheese oversupply risks
Pigs were once the lucky recipients of whey back when it was an undesirable by-product of making cheese. That was if it wasn’t poured down the drain or spread across a field. A strange choice by today’s standards.
There’s little chance of them getting it anymore. Whey has long been popular among weight-lifters for its ability to deliver large whacks of protein in relatively small volumes, and now with GLP-1 users also following recommendations to boost their intake, demand for the protein-laden powders is sky-high.
The scramble has pushed prices to record-highs and driven stocks into short supply. But its most remarkable effect could be yet to come with a widescale transformation of the economics of the entire dairy industry underway as a result.
The reasons are down to its contrasting fortunes with the rest of the dairy industry. Dairy prices tumbled last year as a surge in European milk production combined with the US dairy herd hitting its largest size since the mid-1990s. As a result, EU butter prices hit a three-year low in January while milk and cheese are just about recovering from an extended period on the floor.
By contrast, high-quality whey has been on the rise for almost three years and is now worth around $11/lb, up from less than $4 in 2023, according to Ever.Ag Insight.
These contrasting fortunes mean that at times, cheese factories are making more money off whey than the cheese itself. Understandably they therefore want more of it and are increasingly diverting resources into boosting cheese production in pursuit of this newly profitable product.
“Almost weekly you hear about a small or medium sized investment increasing capacity to be able to produce more of the high proteins,” said John Lancaster, head of EMEA dairy and food consulting at StoneX.
Whey factory expansion
New Zealand’s Fonterra, for example, invested $50m in a whey factory expansion last year, FrieslandCampina bought a US whey supplier already boosting its own capacity, while Ireland’s biggest dairy processor, Tirlán, announced plans for a €126m investment in a facility back in November.
“Whey has transformed from what was once considered just a by-product of cheese making into one of the most valuable and versatile nutritional ingredients in the world,” noted Ireland’s agriculture minister Martin Heydon at Tirlán’s announcement.
In Asia, too, India’s largest milk processor Amul is doubling the size of its whey protein plant and building two new protein facilities in response to demand. While the co-operative has been selling whey powders since 2005, its access to over 20m litres of whey each week means it now makes more sense to put it into higher-protein versions of cheese, chocolate bars and ice creams.
The trend is perhaps most pronounced in the US though where more than $11bn has flowed into 53 new or expanded dairy factories which are all set to open by 2028.
But there could be one small hitch. The push for more whey also means more cheese, and analysts are now warning that the growth could potentially lead to an oversupplied market.
In the US, where much of the whey expansion is taking place, things are still looking stable with cheese consumption on the up and exports hitting record highs year-after-year. The US has doubled its cheese exports over the last five years and is now firmly the world’s second largest seller behind the EU.
“These trends justify the expanded processing capacity, but the growth could temporarily lead to an oversupplied market and reduce cheese prices in the near term as the market works to absorb the additional output,” said Lucas Fuess, Rabobank’s senior dairy analyst.
There are also concerns in some corners about where all the extra milk will come from to supply these new factories. The dairy giants are not going into this with their fingers crossed, investing hundreds of millions of dollars with the hope the milk will come once their doors finally open. Most of them will have locked in future milk supply commitments before construction even started.
Who won’t get the milk?
But as dairy analyst Mike McCully at McCully Consulting pointed out: “The more relevant question is: ‘Who won’t get the milk?’.” He predicted in some regions, factories will be forced into fights for milk by paying more, meaning some will not get all the milk they need.
“Plants that perform balancing functions for certain regions will likely handle less milk, presenting challenges to their operational efficiency and financial performance.”
Luckily for dairy processors, there seems to be one other downward pressure on milk prices. The emergence of ‘beef-on-dairy,’ – a crossbreeding technique that produces a calf for the beef industry instead of dairy – is bringing in premium prices for dairy farmers and reshaping the economics of the entire supply chain.
Farmers began beef-on-dairy to bring in some extra cash amid volatile milk prices and falling revenues, but its popularity has spread across the US as means for farmers to earn up to $1,500 for a calf with little outlay in return.
This, in turn, allows US milk prices to remain competitive on the global market. “It’s radically changed the economics of milk production,” said Rabobank’s Fuess.
It’s all coming together to create a transformation in the dairy industry unlike many in recent history which is finally bringing the sector out of a period of strained margins and relentless pressure into a possible era of sustained profitability for farmers and processors alike.
Few are failing to grasp the irony, however, that it might just have done it with traditional dairy prices still in the doldrums.