Dairy analysis: Mixed market with contrasting fortunes for butter and powders

It’s been a mixed few weeks for European dairy commodity markets with butter and SMP seeing contrasting fortunes, according to multi-national financial services firm StoneX (formerly INTL FCStone).

In a breakdown of where the market is at the moment to AgriLand, Dr. Peter Meehan, senior commodity analyst at StoneX, said:

“The European butter quotation continued to edge lower this week, recording its sixth decline in a row and is now down 2.7% since the end of October.

It’s a slightly more positive story for SMP, however, which got back to positive ways over the last three weeks, gaining 1.4% in that period.

“Dairy futures markets have also been well supported in recent weeks. EEX butter futures’ front six months have moved up by 1.1% since mid-November while EEX SMP’s front six months are up 0.7%.”

Further afield, the analyst noted that milk powders saw further strong gains at last week’s Global Dairy Trade (GDT) auction as the overall index moved up by 4.3%.

He highlighted gains for: whole milk powder (WMP), up 5.0%; skim milk powder (SMP), up 3.6%; anhydrous milk fat (AMF), up 2.6%; and butter, up 3.8%, noting that all contributed to the increase while strong demand from China helped push the index higher.

Supply

Turning to the supply situation at present, Dr. Meehan said: “The supply picture has remained quite strong with October milk supplies running in line with or ahead of last year for the most part.

“Data available to date shows Ireland (+8.3%); the UK (+1.8%); and the US (+2.3%) all seeing new records for milk collections in October.

“New Zealand production (+0.8%) also remained ahead of last year in October, its peak milk producing month, although the year-on-year gains were well down from what we had seen earlier in its season.

Australian milk production also pulled back in October (-0.2%), posting Australia’s first year-on-year decline of the year, which comes about after a very strong start to its 2020/21 season.

Strong demand for dairy commodities meanwhile has helped offset the increased milk supplies seen over the last few months.

Chinese import data for October showed WMP, SMP, butter and whey all posting new record-highs for the month, although infant milk formula and cheese imports both fell back behind last year, the senior analyst concluded.