Dairy commodity prices have remained well supported in recent weeks as big Chinese demand continues to outweigh increasing milk supplies, 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 spot butter prices have continued their push higher, gaining a further 1.1% this week leaving the European butter quotation up 3.2% over the last three weeks.
The gains for European butter come about despite some sharp declines for New Zealand butter at the latest two GDT events, though New Zealand butter had been commanding a big premium over European, so the recent negativity in New Zealand has served to bring their prices back in line with European prices.
“EEX butter futures also posted strong gains over the last couple of weeks with the front six months up 3.2% on average,” the analyst said.
Continuing, Dr. Meehan noted that European skim milk powder (SMP) prices meanwhile continued to edge higher, albeit at a more modest pace than butter – with spot SMP up a further 1.0% over the last two weeks while EEX SMP’s Jun-21 to Dec-21 futures are up 0.7% in the last fortnight.
“Very strong Chinese demand continues to be the driving force behind the firmer prices with import data for April showing imports up 28% year-on-year overall courtesy of WMP [whole milk powder], SMP, butter, AMF [anhydrous milk fat], cheese and whey all posting new records for imports for the month,” he added.
“This is also reflected in the European exports for March which were up almost 9% year-on-year overall.
It has been a record month for European cheese exports – up 17% year-on-year – and whey exports – up 11% year-on-year, the analyst said.
This, coupled with a strong recovery for SMP exports (+15% year-on-year), helped push overall exports ahead of last year.
“New Zealand export data for April meanwhile suggests Chinese imports are likely to remain strong in May with combined exports to China up 24% year-on-year despite total New Zealand exports being down 8% overall.
Moving on to production, Dr Meehan said:
“Milk production has remained strong with collections from the five main dairy exporting regions posting a new record for March [+1.7% year-on-year], with Europe [+0.6% year-on-year]; New Zealand [+9.8% year-on-year]; the US [+2.0% year-on-year] and Argentina [+4.4% year-on-year] driving the increase.
Meanwhile Australia (-1.8% year-on-year) was the only one to post a decline for the month, he said.
“In Europe, three of the four biggest milk producers posted declines with Germany, France, the Netherlands and Spain posting negative numbers in March.”
However, big gains for the UK (+2.2% year-on-year), Poland (+1.7% year-on-year) and Ireland in particular (+13.5% year-on-year) more than offset these declines keeping European production in positive territory overall, the dairy analyst said.
“Data for April suggests Germany and France will remain in negative territory while Dutch collections were reported down 0.8% year-on-year.
Another record-breaking month for the US (+3.3% year-on-year) coupled with a new record for New Zealand collections in April (+11.7% year-on-year) look set to keep global milk production ahead of last year for now at least.
“As we are now in the midst of peak production here in Europe, weather conditions will be critical in determining how much, if any extra milk is produced in Europe over the next couple of months,” Dr. Meehan concluded.