Dairy prices: gap between butter and SMP continues to grow
Whether on global or EU markets, butter prices are continuing to rise in reflection of tight stocks and shortages of fresh product, while SMP prices weaken under the influence of the 350,000t remaining in intervention.
Analysts commenting on this week’s GDT auction, which saw a 1.6% downturn, have expressed no surprise at the 4.9% slippage in butter prices. Some of them even expect to see a return to butter price increases because of the very severe shortages.
ASB economist Nathan Penny said prices were consistent with its forecast $6.75kg/MS for the 2017-18 season.
“Taking a step back, it’s not altogether surprising that milk fat prices took a breather, given the price explosion over recent months. Butter prices, for example, have surged over 35 per cent this year, while anhydrous milkfat prices have lifted a more modest, but still robust, 18 per cent. Both butter and AMF have set multiple auction record highs over 2017.”
“However, we suspect that the slowdown in milk fat prices may be temporary. Demand continues to surge and inventories are now very tight. As supply struggles to keep up, we expect that any further lift in milk fat prices will lift dairy prices more generally. Such a lift would break WMP prices out of their holding pattern of recent months,” Penny said.