After six consecutive weeks of price stability, the European butter quotation finally made a move, albeit small, to the upside last week (+0.2%), according to multi-national financial services firm StoneX (formerly INTL FCStone).

In a breakdown of where the market is at the moment to AgriLand, Dr. Peter Meehan, senior commodity analyst at StoneX, said:

The European butter quotation has now gone 19 weeks since it last saw a move lower, posting 13 weeks of gains in that period sitting at €808 [+31%] above where it was in mid-April, but €248 [-7%] below where it was at the end of January.

“EEX butter futures meanwhile have pushed higher in recent weeks with the September 2020 to April 2021 contracts up 2.6% on average over the last three weeks.”

Continuing, the analyst noted that the stable to firm price action in Europe came about despite the ongoing weakness for fats in the latest Global Dairy Trade (GDT) auction in New Zealand which saw butter (-2.0%) and anhydrous milk fat (-2.9%) both move lower.

“On the milk powder front, the European SMP [skimmed milk powder] index was higher this week, gaining 1.3%, reversing almost half of the declines posted in the previous four weeks,” he said.

As was the case with butter futures, EEX SMP futures have also posted strong gains over the last few weeks with the front six months up 5% over the last three weeks.

“NZ SMP also saw some support [+1.1%] in [the last] GDT auction, although price weakness for WMP [-2.2%] which accounts for the largest proportion of product offered on the platform contributed to the overall index moving down by 1.7%.”

Milk supply

Dr. Meehan noted that market fundamentals in Europe have remained relatively well balanced with good milk supplies met with strong export numbers.

Milk collections for the EU-28 were up 1.2% in June putting collections for the first half of 2020 1.6% ahead of last year, he added.

Strong year-on-year gains for Poland [+4.6%] and Ireland [+2.9%] helped drive the June volume higher as Germany, the Netherlands and the UK also saw slight year-on-year increases for the month.

“European exports meanwhile were strong overall in June with butter exports posting a new record for the month while infant milk formula, cheese, WMP [whole milk powder] and whey were all well ahead of last year, although SMP exports remained behind 2019 levels.”

Further afield, milk production numbers available for July to date show US milk production up 1.5% on last year and Argentinian production up 7.6%. New Zealand production was up 4.4% in July, albeit only the second month of their 2020/21 season and therefore one of the lowest months for milk volumes, he noted.

“New Zealand export statistics for July, meanwhile, were a little underwhelming with sharp year-on-year declines for most products with the exception of WMP which bucked the negative trend and moved higher year-on-year,” Dr. Meehan concluded.