The last couple of weeks have seen some price weakness creep into skim milk powder (SMP) markets while butter prices have been very stable, according to multi-national financial services firm StoneX (formerly INTL FCStone).

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

"This week saw the European SMP quotation post its third decline in a row as it came in at €2,083, down 2.0% on the week while four moves lower in the last five weeks sees the European SMP quotation down €139 (-5.9%) from the recent highs posted in early July.

The European butter quotation continued to hold firm, remaining at the €3,385 level for the sixth consecutive week.

"EEX futures’ prices have also moved lower over the last few weeks with EEX butter’s August 20 to April 21 strip down 2% since mid-July while EEX SMP has given up 7.5% on average over its August 20 to April 21 contracts during the same period."

Continuing, Dr. Meehan pointed out that last week’s GDT auction in New Zealand also took some support from under global dairy prices when its overall index dropped by 5.1%.

The analyst noted that powders - WMP down 7.5%; SMP down 4.6% - and butter, down 2.8%, were the drivers behind the decline. Meanwhile, anhydrous milk fat (AMF), which posted a 3.0% increase, was the only one of the main product groups to post a gain, limiting the downside potential for the overall index.

The supply/demand picture is relatively well balance for the moment with milk supplies holding up well compared with last year.

In a breakdown of the main dairy exporters, Dr. Meehan noted that the latest milk supply data for the top-five global dairy exporters showed production up 0.8% on last year in May with gains for the EU-28 (+0.1%); New Zealand (+3.8%); Australia (+7.6%) and Argentina (+13.1%) driving the monthly volume higher.

"The US was the only one of the five to see a slight decline in May although US production was back to positive ways in June (+0.5%).

"The UK (+0.1%); Poland (+4.6%); Ireland (+2.9%) and New Zealand (+1.8%) also saw strong year on year gains in June," he added.

From a demand perspective, he observed that Chinese dairy imports were a little mixed in June, with WMP, SMP, infant milk formula (IMF) and butter all down on last year while imports of AMF, cheese and whey on the other hand were very strong.

New Zealand dairy exports in June meanwhile showed a sharp bounce for WMP and SMP as well as AMF although IMF; butter and cheese were all down on last year.

"Considering the majority of New Zealand’s dairy exports are destined for China, this would suggest we may see an increase in the volume of milk powders imported by China in July," Dr. Meehan concluded.