Dairy prices rose at GlobalDairyTrade to a four-month high, amid talk that cool weather and weak prices are curtailing the surge in European Union milk production.
Dairy prices, as measured by the GlobalDairyTrade index, rose by 2.6% at Tuesday’s event to their highest since January, with particular buoyancy in products containing milk fats.
Indeed, butter milk power prices soared by 16.2%, with values of anhydrous milk fat itself rising by $4.9%, while prices of whole milk powder, which accounts for the majority of product sold at the benchmark auctions, rose by 3.0% to a 2016 high of $2,252 a tonne.
The rise in whole milk powder values contrasted with a 0.9% drop to $1,658 a tonne in the average price of skim milk powder – taking their premium to $593 a tonne, the highest since October 2013 at GlobalDairyTrade the benchmark twice-monthly auctions run by New Zealand giant Fonterra.
The outperformance comes at a time when many European Union processors have been prioritising production of skim milk powder, after the European Commission doubled to 219,000 tonnes its ceiling for intervention purchases of the product.
The rise in whole milk powder prices, meanwhile, was in line with that expected from analysis of contracts on the NZX futures exchange since the last GlobalDairyTrade auction, two weeks ago.
The futures market had been “signalling a rise between 2-4%” in auction values, according to Commonwealth Bank of Australia.
Values have also received some support from ideas that the growth in EU milk output, after the bloc ditched production quotas in April last year, may be running out of steam.
In Ireland – where output growth has been particularly strong, encouraged by the government and industry – some processors, such as Arrabawn and Aurivo, this week unveiled price cuts of 1 euro cent a litre.
In the UK, where output also grew notably last year, volumes as of late April were running at about 4% below year ago levels.
“This spring’s peak in British milk production looks set to be the lowest since the 2013-14 milk year,” the DairyCo bureau said.
“Low milk prices, wet pasture conditions and below-average grass growth have all helped rein back production.”
The bureau added that similar conditions had affected other EU countries too, meaning that the bloc’s milk production “is not as high as expected.
“Cold weather conditions have certainly dampened production in a number of EU countries, and this could drive positive sentiment and potentially provide support to prices.”