March 10, 2015
Vol. 12, Issue 3
Market Matters
The Many Faces of Lactose
When most people outside of the dairy industry hear
the word “lactose,” they think of lactose-free or
lactose-reduced dairy products. Most have no idea
that lactose is a versatile product in its own right.
Each year, dairy processors produce millions of tons
of lactose. Considered a byproduct, lactose is never
produced directly from milk, but rather it is extracted
from one of two byproducts. Lactose is typically a
byproduct of whey protein concentrate (WPC) and
whey protein isolate (WPI) production.
Lactose, a disaccharide sugar is made up of two
different sugars, glucose and galactose. By weight,
lactose accounts for between 2% and 8% of milk.
About 15% of the protein in milk is whey protein, and
whey contains about 6.5% milk solids of which 4.8%
is lactose.
HOW IT’S MADE
Lactose is extracted from WPI and WPC using
evaporation and crystallization techniques. For
example, during cheese production 80% to 90% of
lactose moves into a serum stream. Lactose is
recovered from the serum through concentration by
evaporation and crystallization. The sugar is then
extracted using a centrifugation process, and the
lactose is dried and ground. There are three kinds of
lactose: edible, refined, and pharmaceutical.
Until fairly recently lactose was considered a waste
product with little value. The first major human
application of lactose was as a growing medium for
the production of penicillin in the 1940s. By the
1950s, however, lactose was replaced with less
expensive substrates. Initially, food manufacturers
added lactose to some of their formulations because
it was inexpensive, but today through advances in
technology and innovation, lactose has become an
ingredient of choice among food manufacturers and
others due to its specific attributes and functionality.
Lactose has little flavor, which makes it a good
choice to use as a carrier or stabilizer for aromas,
pharmaceutical products, and candies. The
confectionary industry has long used lactose in its
formulations. The low sweetness-level of lactose—
about 30% as sweet as granulated sugar—has
made it a popular choice in the production of some
candies, particularly chocolate.
Pharmaceutical companies have also long used
lactose as a cost-effective filler and binder in pills
because of its ability to be compressed. Lactose is
also routinely used in infant formulas, where its
addition is necessary to replicate the composition of
human milk.
Because lactose is not fermented by yeast during
the brewing process, it is also used to sweeten stout
beer, typically called milk stout or cream stout,
popularized in the United Kingdom, and today of
interest to home and craft brewers.
Applications for lactose are increasing rapidly as
more product becomes available. Today lactose is
also being added to marshmallows, gum, bakery
goods, crackers, and other products.
OUTPUT TO CONTINUE STRONG
An expected increase in the demand for cheese,
WPI, and WPC will ensure that more lactose is
available to food manufacturers worldwide for
decades to come. Europe and the United States, the
world’s largest producers of cheese, will remain the
largest producers of lactose as well. In 2014, for
instance, U.S. lactose production increased 12% to
1.2 billion pounds, or 544,000 metric tons. The
additional output has weighed heavily on the market,
which is currently trading between 21 cents and 33
cents per pound—the lowest level since 2009 and
only one-third of the peak price set in 2012 at over
90 cents per pound.
PAGE 1
peary nsas
been so
Hoogwegt Forecast
U.S. Average Prices
$/ton
$/lb
Trend
EU Average Prices
$/ton
$/lb
Trend
Oceania Average Prices
$/ton
$/lb
Trend
SMP
2.315
1,05
Weak
2.380
1,08 Stable
2.800
1,27 Stable
FCMP / WMP
Butter
3.525
1,60
Firm
3.210
1,46 Stable
3.250
1,47
Firm
3.750
1,70 Stable
3.550
1,61
Weak
4.050
1,84
Firm
Cheddar
3.400
1,54 Stable
2.950
1,34 Stable
4.000
1,81
Firm
SWP
1.015
0,46
1.050
0,48 Stable
Weak
Lactose
595
0,27
Firm
790
0,36 Stable
U.S. prices stated ex-w orks / incl. expected CWT subsidy w here applicable; w orld prices
stated FOB main port; EUR/USD: this w eek 1,105
World Comment
The world is closely watching milk output developments in the Northern as well as the
Southern hemisphere. European milk output is disappointing due to a sharp drop in
farmgate prices and superlevies still in place. An increase in milk output is expected
from April onwards, but current farmgate prices might temper the growth. US milk
output is lower than expected and y-o-y figures have gone down from +3% to +2%.
Oceania is entering the low season, and it remains to be seen how lower milk prices
and drought will affect the new season production. Due to a depreciating Euro versus
the US Dollar, milk powders of EU origin are most competitive on the world market.
SMP prices have weakened the past fortnight in anticipation of limited world demand
and good production. US NFDM prices remain stable, where Oceania levels moved
further up this week. FCMP prices in New-Zealand moved sideways, in Europe the
tendency is weak. Butter prices are under pressure in Europe, while US butter is
expected to remain firm until after Easter. The whey market is showing a reversed
picture; Europe stable and the US weakening. As well for Cheddar Cheese US and
Europe are similarly priced. For Mozzarella Europe is leading.
DID YOU KNOW?
 India and South Korea
dramatically increased
lactose imports in 2014
vs. 2013 levels to 23,576
metric tons (up 22%) and
19,617 metric tons (up
23%), respectively.
 While still fairly small in
volume, year-over-year
exports of lactose from
Malaysia increased
twentyfold to 2,410 metric
tons, making Malaysia
the eighth largest
exporter of lactose.
 Unlike sugars that are
broken down quickly by
the body and converted
to fat, lactose breaks
down more slowly,
allowing it to be used as
the body needs it.
Bring it Home
World Trade Expands in Fledgling Lactose Market
The world’s largest cheese producers, Europe and
the United States, produce about 85% of the world’s
lactose. A number of manufacturers, particularly in
Europe, have made major investments over the past
few years to improve recovery and quality of lactose.
compared with 2013. While Chinese imports tapered
off as 2014 progressed, they have increased
dramatically over the previous few years as demand
for higher-quality foreign ingredients increased.
The United States is the world’s largest exporter of
lactose. Last year, the United States exported
344,195 metric tons of lactose, up 1% from 2013’s
341,780 metric tons. In 2013, the EU-28 exported
152,485 metric tons of lactose. Last year, EU exports
of lactose climbed 14% to 174,419 metric tons.
The next largest buyer of lactose was New Zealand.
In 2014, New Zealand increased its imports of
lactose by 46% to 71,720 metric tons, with nearly half
of the purchases coming from the EU-28. The world’s
third largest buyer of lactose was Japan with 69,938
tons, a decline of 1% from 2013 levels. Imports by
other countries paled by comparison.
Third place New Zealand shipped 20,155 metric tons
of lactose to foreign buyers last year, a 24% decline
from 2013 sales. Another supplier of note in 2013
was Australia, with 18,303 metric tons in export
sales. Last year, however, Australia’s exports of
lactose fell 56% to 8,090 metric tons.
The world’s top three importers of lactose are more of
a surprise. First-place China bought 84,855 metric
tons of lactose from foreign suppliers in 2014, up 2%
PAGE 2 | March 10, 2015 | Vol 12, Issue 3
Hoogwegt Horizons is a publication of Hoogwegt Groep B.V. Information is gathered from reliable sources but it cannot warrant the accuracy of any of the data in the report.
© 2015. Reproduction with permission only. Hoogwegt Groep B.V., P.O. Box 30242, 6803 AE Arnhem, The Netherlands, +31263884802. For information: [email protected]