Dairy analysis: European markets continue to grind higher

European dairy commodity markets continued to grind higher over the last few weeks, 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:

“The European butter and SMP [skimmed milk powder] quotations [are] both seeing gains as markets get back into gear after a quiet few weeks in late July / early August.


“Four weeks of gains in a row sees the European butter quotation up 1.4% from where it was on the 19th August.

The European SMP quotation also pushed higher over the last four weeks, up 4.7% in that period.

“EEX futures prices have been a bit mixed in recent weeks, however. EEX butter’s October 20 to May 21 contracts are down 2.3% since the end of August while EEX SMP prices levelled off somewhat, holding relatively flat over the same period,” the analyst noted.

“With New Zealand’s new 2020/21 season now well under way, this week’s GDT [Global Dairy Trade] saw a sharp and somewhat unexpected bounce with the overall index moving up by 3.6%, taking back a large proportion of the ground lost over the previous four auctions.

SMP was the standout performer at this week’s event recording its third increase in as many auctions, gaining 8.4%.

“WMP [whole milk powder] which accounted for over 60% of the product sold this week, was also higher, up 3.2%.

“Fats were a bit mixed with AMF [anhydrous milk fat] gaining 2.0% while butter remained under pressure, posting its fifth decline in a row, down 1.4%,” Dr. Meehan said.

Strong supplies

Turning to supply and production internationally, the StoneX analyst noted that the stable to rising dairy commodity prices have come about despite strong milk supplies on a global basis.

“European collections for July were up 2.1% with most of the main milk producers seeing good year-on-year gains,” he said.

Germany (+0.8%); France (+2.7%); the Netherlands (+1.2%); Poland (+2.2%); and Ireland (+4.4%) in particular drove milk supplies higher.

“Increased milk fat and protein content across most of Europe’s main milk-producers put European milk solid collections even further ahead of last year in July, up 2.8%.

“On a global basis, the other four main dairy exporters also saw strong milk supplies in July with New Zealand production up 4.4%; Australia up 1.9%; the US up 1.5%; and Argentina up 7.6% on last year.

“Cumulative milk supplies for these five dairy exporters for the year to July are now 2.0% ahead of the same period last year,” Dr. Meehan concluded.