Dairy market analysis: Prices push higher amid strong demand

European dairy commodity prices pushed higher in recent weeks as strong demand continues to outweigh good milk supplies, according to multi-national financial services firm StoneX.

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

“After weeks of grinding lower in the run-up to Christmas, the European butter quotation got 2021 off to a positive start, moving up by 1% since the end of December.

“The European SMP quotation continued to move higher as well, up another 2% over the last two weeks.

Despite the recent gains, the European butter quotation remains 9% below where it was at the end of January last year while SMP prices are down 15% for the same period.

Dr. Meehan noted that EEX dairy futures also got 2021 off to bullish start with EEX butter’s January 2021 to June 2021 contracts up 1.6% on average; meanwhile, EEX SMP’s front six months are up 3.4% since the start of the year, he added.

Pointing to the first Global Dairy Trade (GDT) event of the year last week, the analyst said: “A big move higher for the GDT index at last week’s auction has provided some support for European prices.

“The overall GDT index moved up by 3.9% last week with WMP [+3.1%] and SMP [+4.1%] both lending some support but butter [+7.2%] and AMF [+5.5%] seeing the biggest gains.

“This bounce for the GDT came about despite somewhat underwhelming imports by China in November,” he noted.

Overall, Chinese imports were higher although strong SMP [skim milk powder] and in particular whey imports drove this. WMP [whole milk powder], infant milk formula, butter and AMF [anhydrous milk fat] imports on the other hand were all down compared with November 2019.

Turning to the supply end of things, he said: “Milk production data for November meanwhile is showing supplies holding up well compared with 2019 as UK production was reported up 2.1% and Polish production up 1.9%.

“Further afield, Australian milk production moved back in line with 2019 levels after slipping into negative territory a month earlier in October,” Dr. Meehan concluded.