Analysis: European dairy markets continue to trend higher

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.