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27 Apr 2017

Dairy Market Blog

Dairy, Dairy Markets, FMP, Liquid Milk

Powder prices weak, but are GDT, spots and futures predicting a recovery?

The last GDT auction last week (18th April) was the third consecutive positive auction, but probably most remarkable because it saw a recovery in the price of WMP (3.5%), and most of all SMP (7.1%) after dramatic SMP price falls in the last two auctions.

Source: GDT

NZ and European futures also appear to suggest some slight improvements in powder prices – just not quite yet, with uplifts available for July and August 2017 SMP trade, while WMP may do better in the shorter term for trade in May and June.

Source: EEX via Dairy Markets

Source: NZX via Dairy Markets

Spot quotes in the EU are showing stable to firming SMP with prices €10 to 30/t above intervention buying in levels.  Prices had been stable for the last couple of weeks, and have firmed slightly in Germany and the Netherlands, while falling slightly in France this week.  Butter is continuing stable to strong as are whey powder prices.

Source: FCStone

Meanwhile, the EU reported raw milk spot prices from Italy and the Netherlands have both stabilised at €33.8/100kgs and €31.0/100kgs respectively as at 23rd April 2017.

Source: EU MMO

EU average SMP prices have eased in recent weeks, as have WMP prices.  At currently reported prices (26/04/17), an Irish product mix would return around 35.9c/l before processing costs, down around 1.8 c/l since the peak of early January.    Still, this would comfortably justify the levels of farm gate milk prices paid by co-ops for March milk, which according to that month’s Farmers’ Journal Milk Price League, published today, average out at 29.9c/l + VAT.

Hence, any pessimistic talk around co-ops’ ability to sustain current milk price would be very premature indeed!

This is because of weaker SMP and WMP prices, though butter, cheddar cheese and whey powder have all remained quite strong for the first four months of 2017.

Based on EU MMO data

Intervention buying in has resumed since late March, with a total of 2669 tonnes have been offered and purchased into intervention in the three weeks to  16th April, coming from Lithuania, Germany, the Netherlands and Poland, the only contributors thus far.  A further 1,100 tonnes is reported to have been taken in this week (a far cry from the weekly quantities seen in early 2016).

While these newly bought in quantities are far more modest than the weekly amounts seen in early 2016, they come to join the 350,161 tonnes purchased during the 2014-16 period that remains in stock and continues to overhang the market.

The EU Commission has reiterated its view that product will only be sold out of intervention “at the right price”.

Ornua PPI unchanged for March

The Ornua PPI, which reflects returns for the mix of product traded by Ornua on behalf of its member co-ops for that month, remains unchanged for March compared to February.  According to Ornua, this reflects lower SMP and butter price returns, combined with improved Cheddar and whey prices.  Allowing for a processing cost of 6.5c/l, they tell us, this would be equivalent to a farmgate milk price of 29.8c/l + VAT.

Source: Ornua

 

CL/IFA/27th April 2017

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