European dairy commodity markets continued to trend higher in recent weeks with butter and skim milk powder (SMP) prices seeing further support, according to multi-national financial services firm INTL FCStone.

Strong export numbers and a decent bounce for the Global Dairy Trade (GDT) index this week suggests global demand remains firm.


Speaking to AgriLand, Dr. Peter Meehan, senior commodity analyst at INTL FCStone, explained:

A further 2.3% increase for the European butter quotation pushed it to a 10-week high - although it’s worth noting, even though it gained 22% over the last eight weeks, the European butter index remains 14% below where it was at the end of January.

SMP’s strength also continued over the last couple of weeks, up a further 8%. Again, despite strong gains in recent weeks (+18% since mid-April), SMP’s average price is 16% behind end of January levels.

"EEX Dairy Futures’ markets meanwhile have pulled back a bit since the start of June with the front six months of the butter forward curve down 3.9% and the front six months of the SMP forward curve down 3.7%," the analyst explained.


Turning to production levels, Dr. Meehan noted that, on a global basis, milk supplies have remained strong, with collections for the top five global dairy exporters up 1.3% year-on-year in April.

"New Zealand (-0.6% year-on-year) was the only one of the top five to post a decline while collections for the US (+1.5% year-on-year); Australia (+6.4% year-on-year); and Argentina (+10% year-on-year) were all higher," he said.

"Milk production for the EU-28 was also up in April (+0.8% year-on-year), although this is the smallest percentage increase since the start of the year.

European export numbers for April are showing continued strong demand for European butter (+66% year-on-year), cheese (+5% year-on-year) and infant milk formula (+2% year-on-year).

Dr. Meehan highlighted that butter exports posted a new record month while Ireland was the leading exporter accounting for more than a quarter of the volume exported in April (+40% year-on-year).

"Improved global demand was also reflected in this week’s GDT auction which posted its biggest increase since the start of January, gaining 1.9%, pushed higher by WMP (+2.2%); SMP (+3.1%) and AMF (+0.8%).

"This puts the GDT index at its highest level since the start of April," Dr. Meehan concluded.