Market report: Dairy prices continue to rise

Q Butter and skimmed milk powder prices have continued to climb in Europe, raising hopes that commodity markets have turned the corner.

Industry commentators at last week’s Dairy UK conference suggested that the upturn was sustainable, and EU agriculture commissioner Mariann Fischer Boel was eager to tell the European parliament on Thursday (17 Sept) that “prices are improving”, so there was no need to cut quotas or raise intervention.

But levy body DairyCo is more circumspect. Its latest Market Update confirms that EU butter prices have gained 20% since August to £2400/t, while SMP is up 13% to £1600. Increased buying interest in the EU and further afield are the main drivers.

“These rises occur at a time when 83,222t of butter and 281,533t of SMP are held in EU intervention stores,” it notes. While the EU Commission is unlikely to release these stocks any time soon, they will have to come out some time. There is also a further 134,000t of butter held in private storage, which could limit any market upturn.

Encouragingly, however, world butter and powder markets have also firmed, according to DairyCo, making it more economic for the EU to export these products than pile them up in intervention stores.

The other concern is cheese stocks. Large volumes of cheddar have been made with very cheap milk in Ireland this year and are expected to hit the UK this autumn.