European dairy markets cool as drought fears dissipate

European dairy prices are coming under pressure just as UK farmers are entering the expensive winter housed period.

Intervention stock sales slowed as provisional results for the first of the bi-weekly tenders show just 2,500t was shifted. Meanwhile, butter prices have also dropped as buyers become less fearful of drought-related shortages.

A total of 37 bids were received for 36,812t at the invention stocks auction held last week but just 2,499t was sold. It’s a marked decrease from the 9,000t which changed hands in September’s sale.

On a more positive note, the minimum selling price was set at €1,230/t – equal to the prices at the previous two tenders.

It brings total sales out of intervention to around 143,500t, with UK stocks remaining unchanged at around 7,000t.

Change in market direction

It comes as a change in the direction of the milk market value in September points to potential downward pressure on farm-gate prices by the end of the year.

Analysis by the Agriculture and Horticulture Development Board (AHDB) said that with milk production across the EU showing “little or no immediate impact” from the hot, dry summer, there were “few concerns” over a lack of supply.

A spokesman explained that as a result, market sentiment had shifted.

The impact has already been seen on wholesale markets, with prices falling for butter and cream.

Western European butter prices have dropped for the last seven weeks, with just one minor uplift over that time.

It means the EU butter price minimum is now at $5,018/t – down from $6,002/t in the last week in June.

The downward trend is expected to continue into October as higher EU butter production is coupled with lower exports, caused largely by higher butter prices in the EU compared to international counterparts.

The drop in the milk market value in September was limited, however, as mild cheddar prices held firm for most of the month.

SMP prices also bucked the trend, boosted by a strong start to the month, growing overall despite easing slightly in later weeks.