European dairy commodity markets have been mixed of late with demand for – and, consequently, price of – butter softening, while skim milk powder powers on.

And, according to multi-national financial services firm, StoneX, tightening milk supplies and strong demand are the main reasons for such recent strength in commodity prices.

Delving a little deeper into the detail, the European butter index posted 14 consecutive weeks of gains, during which time the index increased by over 40%.

However, the last two weeks of negative moves sees European butter down 1.4% from the highs of mid-November, according to analysis by the company.

Despite the decline, however, the average butter price remains 64% above where it was this time last year.

Spot skim milk powder (SMP), meanwhile, recorded its eighteenth gain in as many weeks, up 32% in that period – since the start of August.

Commenting on the analysis, Dr. Peter Meehan, senior EU dairy analyst at StoneX said:

“Looking to European dairy futures markets, EEX Butter futures have been a little mixed with their December 2021 to May 2022 strip down 0.4% over the first half of November before moving back up by 0.8% over the second half of the month.

“EEX SMP’s front six months, on the other hand, just continued to push higher throughout November, up 7.5% over the course of the month.”

Milk collection data

The latest milk collection data shows that combined production from the five big global dairy exporters fell back behind last year in September (-0.6%) with negative numbers in Europe (-0.7%); New Zealand (-4.4%) and Australia (-2.9%) driving the decline, while US production was up just 0.2%.

Continuing, the analysis pointed to Argentina being the only one of the five that maintained strong gains in September, up 4.6% on last year.

October collection numbers have also been underwhelming, according to StoneX, with New Zealand (-3.3%); the US (-0.5%); the Netherlands (-4.2%) and the UK (-0.5%) all reporting production down on last year.

Commenting on Ireland, Dr. Meehan said:

“Irish milk collections, on the other hand, remained ahead of last year in October (+2.4%) although the gains reported were more moderate than what we had seen over previous months.”

High input costs are one of the factors being blamed for the declining global milk supplies.

Continuing, Dr. Meehan said:

“Looking at the demand picture, trade data released last week reported Chinese dairy imports for October falling 2.7% behind last year with SMP (+28%) and butter (+19%) the only two of the main products to see increases compared with year ago volumes.

“New Zealand exports in October were also a bit weaker than expected, up just 0.4% on last year with SMP (+13%) and cheese (+20%) seeing gains and all the other main products falling behind last year.”