Recent sale of SMP in intervention ‘an indicator of a stronger market’

The recent sale of almost 42,000t of skimmed milk powder (SMP) out of intervention is “an indicator of a stronger market”, according to the Irish Creamery Milk Suppliers’ Association’s (ICMSA) Gerald Quain.

Milk markets have continued to gather momentum this week, the chairperson of the ICMSA’s Dairy Committee added.

Because of this, he believes there should be no reason why this momentum should be halted in the coming weeks – with positive indicators from global dairy markets.

Milk production in Britain, one of the main dairy markets, is back 2% in 2018 to the start of May – due in no small part to the cold spring – and milk production growth has also slowed across Europe as well as globally, according to Quain.

Milk is no different than any other product with the supply/demand balance determining price and tightening supplies are having an impact.

“Therefore, it is no surprise to see spot prices in the Dutch quotations returning over 35c/L after processing and including VAT for the butter/SMP combination.

“This is up 7c/L since the start of April and reinforces the ICMSA’s view of a market that is bullish. Similarly, whole milk powder (WMP) returns are over 31c/L – up 3c/L in that same period.

“Butter continues its upward trajectory, with UK butter well up on this time last year – but, more importantly, powders have also risen significantly in the last number of weeks,” he said.

‘Stumbling block’

Quain outlined that the large levels of SMP in intervention has created an overhang on the market and has become the main stumbling block to powder sales.

But, he argued that the sale of almost 42,000t of SMP from the latest tender in May is an indicator of a stronger market.

To put that in context, over 76,000t of SMP have been sold from intervention in two months – or a reduction of over 20% – compared to only 10,000t sold in the previous 18 months; as well as this, SMP prices are on the increase – which is a significant positive, he added.

Concluding, the ICMSA’s Dairy Committee chairperson stated that the milk markets are now moving in a positive direction and this must be reflected in milk cheques in the coming months.