European dairy commodity prices came under further pressure this week as strengthening global milk supplies are beginning to outweigh the strong dairy demand seen over recent months, 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 recorded its third decline in four weeks this week while the SMP [skim milk powder] quotation made it three weeks of declines on the trot.
“This puts spot butter down 2.9% since the start of June while SMP has given up 2.8% over the last three weeks.
“EEX dairy futures markets have also taken a step lower with EEX Butter’s front six months down 1.4% over the last two weeks and EEX SMP down 2.0% over the same period,” Dr. Meehan said.
Continuing, the analyst noted that, from a milk-supply perspective, production for the five main dairy exporters (Europe, US, New Zealand, Australia and Argentina) was very strong in April – up 2.5% year-on-year posting a new record for the month.
It was added that European milk supplies pushed further ahead of last year, up 1.3% for the month.
“Collections for May also look set to remain strong with most of the main milk producers likely to post further year-on-year gains,” Dr. Meehan noted.
“Milk production here in Ireland was very strong in May posting a new record for monthly collections (+6.1%). A sharp year-on-year jump for milkfat and protein content meanwhile put Irish collections 7.6% ahead of last year on a milk-solid basis.
Looking across the water, the StoneX analyst noted that the UK also continued to see good gains for collections in May (+1.5%).
It’s a similar story further afield, with New Zealand production up 7.6% in May, US production posting another record month, up 4.6% and Argentinian production up 3.4%, he added.
“Looking at the demand side, Chinese trade data is showing their dairy imports remaining extremely strong in May (+59% year-on-year) while New Zealand trade data showing very strong exports in May (+16% year-on-year), most of which is destined for China, suggests this trend will continue into June.
“European dairy exports for April on the other hand were a little disappointing, down 3.6% overall compared with last year,” Dr. Meehan concluded.