Dairy market analysis: Euro SMP prices firm up while butter recovers

European skim milk powder (SMP) prices continued to firm up while butter saw some support this week after last week’s move to the downside, 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:

“Two further weeks of gains for the European SMP quotation saw it move up by 1.7% since the start of October climbing to a 29-week high.

This week saw the European butter quotation regain a little bit of the ground it lost two weeks ago but remains 2.1% below where it was at the end of September.

Continuing, the analyst said: “EEX futures markets meanwhile have been firmer since the start of October with SMP futures up 0.7% over its front six months.

“Butter futures meanwhile are up 3.3% over its October 2020 to June 2021 contracts with butter’s strong performance at last week’s GDT [Global Dairy Trade] auction lending some support to European butter futures markets.”

It was noted that the GDT’s overall index was up 2.2% last week, driven higher by gains for whole milk powder (WMP) which increased 1.7%; anhydrous milk fat (AMF) which is up by 5.4%; and butter which rose by 8.4%; while SMP was a little weaker, down 0.9%.

Supply

Turning to production and supply, Dr. Meehan said: “Data released this week shows milk collections for Germany and France, Europe’s two biggest milk producers, pulling back a bit in August while Australian milk production continues its recovery.

German [-1.0%] and French [-0.9%] milk collections slipped back behind last year in August as the hot weather conditions that hit most of continental Europe in August took its toll on milk output.

“Australian milk supplies meanwhile continued to see strong gains over last year in August [+3.5%] although this is against very weak numbers in 2019 when Australian collections were heavily impacted by drought conditions,” Dr. Meehan concluded.