European butter’s recent run of strong gains came to an end this week while skim milk powder (SMP) continued to grind higher, 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 index saw its first, albeit slight, decline since December although strong gains over the previous two weeks leave butter up 18% since the beginning of March.

Spot European SMP meanwhile extended its positive streak to four weeks on the bounce and is now up 5% over the last month.

Futures market prices on the other hand have come under pressure recently with EEX butter’s April 21 to September 21 contracts down over 6% over the last three weeks, while EEX SMP’s front six months are down almost 4% over the same period, the analyst added.


On a global level, Chinese demand has been a key driver behind the recent price strength with trade data showing Chinese whole milk powder (WMP), SMP, cheese and whey imports all performing well since the start of the year, Dr. Meehan continued.

“Butter, AMF [anhydrous milk fat] and infant milk formula imports on the other hand have slipped well behind 2020 levels,” he added.

This trend has been reflected in recent Global Dairy Trade (GDT) auctions with China accounting a large proportion of the volume on offer.

The concern from a milk price perspective is the current global strength in commodity prices has been pushed primarily by big Chinese demand while European and New Zealand trade data showed exports to all other destinations have been struggling somewhat.

This, Dr. Meehan warned, means that any reduction in the Chinese appetite for dairy commodities could see global supply outweigh demand.


Turning to the supply side, the StoneX analyst noted that Irish milk production was quite strong in February and even stronger when adjusted to allow for the extra day in February 2020 (+8.1% on an adjusted basis).

Meanwhile UK collections also remained in positive territory (+0.6%), he said, adding:

Further afield, New Zealand are also seeing a strong finish to their season with February collections up 6.7%, while US production was up 2.0% and Argentinian milk supplies up 5.8% compare with last year.

He noted that all year-on-year percentage changes are adjusted to take into account the extra day’s milk production in February 2020 due to the leap year.

This follows on from European milk production dropping 0.7% behind last year in January, pulled lower by declines for Germany (-1.7%); France (-3.4%) and the Netherlands (-1.4%).