Dairy commodity prices remained under pressure over the last couple of weeks, according to multi-national financial services firm StoneX.
Outlining the latest market movements to Agriland, Dr. Peter Meehan, senior commodity analyst at StoneX, said:
“The European butter quotation is down 2.1% since the start of July despite a very slight gain this week while spot SMP is down 2.0% over the last two weeks and has now given up almost 5% over the last five weeks.
“We’ve seen similar price trends on dairy futures markets over the last two weeks with EEX butter and SMP’s respective Jul21 to Dec21 strips down 2.0% and 1.9% since the start of the month.”
Turning to the supply side of things, Dr. Meehan said: “Overall, European milk supplies have remained pretty good with a mix of below-normal temperatures and good amounts of rainfall providing very good pasture growth conditions across most of Europe’s main milk-producing regions.”
As such, the analyst noted, German milk collections moved back in line with last year in May, while French production moved well ahead of last year (up 2.7%), albeit this is against some pretty weak collection numbers in France in May 2020.
Continuing, he said:
“Added to this, we’ve seen strong collections reported for Ireland (+6.1%), the UK (+1.5%), Poland (+1.4%) and Spain (+1.3%) – all of whom saw record months in May, setting us up for a new record month for European milk production for Europe’s peak month.”
This strong milk supply coupled with some concerns that Chinese demand may just be beginning to ease a little bit has led to the current bearish tone in the market, the StoneX analyst said.
“We saw similar weakness at the latest GDT auction in New Zealand in which the overall index moved down by 3.6%, pulled lower by WMP (-3.0%); SMP (-7.0%); AMF (-0.9%) and butter (-3.2%).
“Early indications suggest we may see a pullback in milk supplies for Germany, France and the UK – Europe’s three biggest milk producers – in June which could lend some support to dairy prices and help stop the recent run to the downside,” Dr. Meehan concluded.