Are dairy commodities starting to lift off the floor?

EU dairy products’ prices generally increased last week compared to the previous 4 weeks’ average.

Latest figures from the EU milk market observatory show  a 4.7% increase for butter, 4.3% for WMP, 1.4% for SMP, while cheddar decreased by 1.3%.

Meanwhile, spot milk prices also improved further last week, in Italy 27.3 c/kg and in the Netherlands 26.5 c/kg.

According to the AHDB, the fat market has been the main driver behind the recent increases in commodity prices.

The EU Commission publishes average EU prices each week and these have shown butter up 11% in three weeks.

butter prices

While there have been a number of short-term price increases recorded over the last 18 months that didn’t result in a sustained recovery in prices, the AHDB says this latest rise is the strongest recorded for more than three years.

“The upturn in butter prices appears to have been a bit of a surprise for some. A number of traders are explaining it as buyers with lower-than-expected stocks needing to fill stores before the summer.

“Certainly the higher butterfat levels in milk this year suggest there is plenty of fat around, but if buyers have left themselves short, prices will go up,” it says.

Meanwhile, prices for Skimmed Milk Powder are slower to increase. They are trending upwards, but not as rapidly as butter.

smp prices

The main reason is likely to be the high level of SMP intervention stocks. Careful management of those stocks is required by the EU Commission to avoid drowning out any recovery.

Production

For come commentators, the more positive outlook shouldn’t come as a great surprise.

They cite milk production running significantly down on expectations in the UK as well as other EU countries.

EU MMO
EU MMO

Looking ahead, the AHDB says domestic UK production is expected to be lower this year than last, and the EU commission is now forecasting a contraction in EU-28 production over the remainder of the year.

It says that this suggests the huge year-on-year increases in milk production are now behind us.