Analysis: European dairy prices level off amid ‘semblance of equilibrium’

European dairy commodity prices levelled off somewhat over the last couple of weeks as the supply and demand situation found some semblance of equilibrium for the moment at least, according to multi-national financial services firm StoneX (formerly INTL FCStone).

Good rainfall across most of Europe has eased dryness concerns which in turn has seen milk supplies hold up relatively well overall.

Prices And Demand

Speaking to AgriLand, Dr. Peter Meehan, senior commodity analyst at StoneX, said:

“EU dairy export data meanwhile is showing strong demand for most products shipped in May.

After posting 12 weeks of gains on the bounce, the European butter quotation has been unchanged for the last two weeks holding at the €3,385 level.

The analyst noted that the European skim milk powder (SMP) quotation was a little firmer this week, moving up by 0.5% – although this comes on the back of a sharp decline last week, on Wednesday, July 15.

“Further afield, things were a little less encouraging at this week’s GDT [Global Dairy Trade] auction in New Zealand where the overall index saw its first decline in five events, edging down by 0.7%.

“A slight increase for the WMP [whole milk powder] index (+0.6%) which accounts for the about half of total volume offered wasn’t enough to offset declines for SMP (-0.5%), AMF [anhydrous milk fat] (-2.8%) and butter (-4.9%).

EU dairy exports were very strong overall in May with butter posting a new record for the month, up 55% on last year, while exports of cheese [+3% year-on-year], whole milk powder [+17% year-on-year] and whey powder [+23% year-on-year] all saw good gains compared to 2019.

However, Dr. Meehan noted that exports of SMP, with a 10% drop year-on-year, and infant milk formula (IMF), which decreased by 14% year-on-year, were weaker – although “big export numbers for both products in 2019 is exaggerating the year-on-year decline to some extent”.

Continuing, the StoneX analyst said:

“Looking a little closer at the butter exports shows Ireland was the leading exporter out of the EU in May, accounting for almost one-third of the EU total and accounts for almost a quarter of the total European butter exported for 2020 to date.

Ireland exported a record 7,400t of butter in May, up 50% on last year, while the US was the leading destination for Irish butter, accounting for over two-thirds of our May volume [+63% year-on-year].

Irish cheese exports also performed well posting a new record for the month (+23% year-on-year) while SMP (-26%) and IMF exports were down heavily compared with 2019, the analyst noted.

Milk Supply

“Milk supply data meanwhile shows production holding up relatively well overall in recent weeks with European collections for May set to come in close to last year’s record volume despite Germany [-0.2% year-on-year] and France [-2% year-on-year], Europe’s two biggest milk producers seeing negative numbers.

“The Netherlands meanwhile saw its June collections up 0.9% on last year while the US (+0.5%) also moved back into positive territory with a new record for June,” Dr. Meehan concluded.

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