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Weekly dairy market update (13– 16 April)

Thursday, 16 April 2020

By Patty Clayton

The upheaval in dairy markets of the last few weeks calmed slightly this week. 

There were no reports of uncollected milk in recent days, although the ability to process milk into storable products appears to be fully utilised. There seems to be a couple of reasons for the reduced pressure on spot markets:

  • increased buying interest from the continent for bulk cream and skim concentrate
  • order volumes from retailers, particularly smaller convenience stores who are benefitting from the long queue times at the larger supermarkets

There was some support to bulk cream prices from the continent, with reports of prices ranging from £0.70-0.75/kg to nearer £0.85/kg for those who have access to EU buyers. Buyers have returned to the market after the end of the holidays, and appear to be motivated by the current low price levels, as well as the fact that milk production in some of the key EU producing countries has moved past the peak.

Quoted prices for spot milk this week remain at low levels, but have not fallen further. With no change to the industry’s ability to process milk, the value of any surplus milk put on the market remains tied to the value of the cream that can be extracted.

Trade in bulk butter remains elusive however, and prices remain at around £2,300/tonne (€2,500/tonne). The expectation of falling prices in advance of increased availability continues to keep buyers away from committing to forward deals and only sourcing immediate needs.

Skim milk powder (SMP) prices have fallen slightly from last week, and are now hovering around the intervention level. For most businesses however, intervention is not yet an attractive option given the additional packaging and storage requirements needed.

The uncertainty surrounding both supply and demand will undoubtedly continue. Milk production at this time of year is typically unpredictable due to the weather. Adding to this however is the impact on milk production from lower prices, changes to base volume allocations and production reduction schemes implemented by milk buyers.

On the demand side, consumers’ purchasing habits have not fallen into a set pattern, keeping retailers uncertain over what and how much product to stock – and therefore how much milk will end up on spot markets. The recent announcement that some fast food outlets will resume delivery services will change the demand landscape again as well.

Patty Clayton

Lead Analyst - Dairy

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