Dairy markets: Euro butter strength continues but mixed fortunes for SMP

The recent strength for European butter prices continued over the last couple of weeks while SMP price action was a bit mixed, according to multi-national financial services firm StoneX.

In a breakdown yesterday (Thursday, February 25) of where the market is at the moment to AgriLand, Dr. Peter Meehan, senior commodity analyst at StoneX, said:

“Spot butter prices were stronger again this week, adding to last week’s gains which puts the European butter quotation up 12% since the start of the year.

The European SMP [skim milk powder] quotation on the other hand edged higher last week before posting its first, albeit slight, decline of 2021 this week.

“It’s been a similar story for dairy futures’ markets, with EEX butter’s front six months up 1.2% over the last fortnight while EEX SMP gained 0.4% over the same period.”

Noting that strong global demand has been the main catalyst for the recent price support, Dr. Meehan added:

“Last week’s GDT [Global Dairy Trade] auction helped pull European prices higher as it saw further big gains overall (+3.0%), driven by good demand for whole milk powder (+4.3%), and to a lesser extent butter (+2.0%) and anhydrous milk fat (+1.1%),” he said.

Prior to last week, strong Chinese demand had been the driver behind GDT’s recent run of gains, the analyst said.

While Chinese buying activity was a little more subdued last week due to Chinese New Year festivities, south east Asia and Oceania regions more than made up for any reduction in Chinese activity at last week’s auction.

Continuing, Dr. Meehan said that the latest collection data shows production holding up at record levels in December, though he noted that some concerns have lingered in the background relating to individual countries.

“Combined production from the five main dairy exporting regions saw a new record in December, up 1.4%, with: Europe [+0.2%]; New Zealand [+0.7%]; the US [+2.6%]; and Argentina [+6.9%] driving the increase while Australia [-2.0%] was the only one to post a decline for the month.

“In Europe, Germany, France, the Netherlands and Spain all saw negative numbers in December while decent gains for the UK; Poland; Italy; and Ireland offset these declines keeping European collections in positive territory overall.

Data for January suggests Germany and France will post further sizeable declines while Dutch collections were reported down 1.4% year-on-year earlier this week. The US on the other hand started 2021 in the same record-breaking fashion it ended 2020, with collections up 1.6% year-on-year.

“A strong finish to the year for European dairy exports added to the bullish sentiment. Butter and anhydrous milk far were the only two products to see year-on-year declines in December while very strong butter exports earlier in the year left 2020 exports at a record 216,000t [+17% year-on-year].

“Cumulative exports of Cheese, WMP, whey, lactose and casein were all up compared with 2019 volumes while cheese and whey also posted new records for cumulative exports,” Dr. Meehan concluded.