Prices for milk powder stabilised in July but they may start to go up again if a cattle feed grain shortfall hits milk supply says Liliana Gonzalez of Mintec
The dairy industry is waiting with bated breath for the launch of Europe's first dairy futures market in September. The impact it will have on the market for milk powder is yet to be seen but in the meantime EU policy, global demand and the weather continue to be the main driver of price fluctuations in the marketplace.
Milk powder markets appeared to stabilise in July after five months of price rises, as the prospect of increased supply from EU intervention stocks and improvements in milk deliveries put downward pressure on prices.
Prices for whole milk powder stood at about £2,300 per tonne at the end of July, compared to £2,397 in June. Skimmed milk powder prices were also down, to £1,888 per tonne for European product compared with £1,963 in June and a two-year high of £2,149 in May.
July prices for both WMP and SMP remained considerably above 2009 prices, however, with WMP 25% and SMP 20% more expensive than their respective annual average for 2009.
A key reason for the recent price falls is the prospect that the EU might release its stored intervention stocks of SMP into the market. Earlier this year, the European Commission agreed to auction its SMP and butter stocks in a bid to alleviate the tightness of supply experienced by the market during the first four months of 2010. However, it subsequently rejected all the SMP bids it received as too low compared with market prices at the time.
As a result, 192,000 tonnes of SMP remain in intervention as of the end of July and could come on to the market if and when bids reach a level acceptable to the EC, driving down prices for both SMP and WMP.
Increased EU production of SMP, coupled with reduced demand from the world market, has been another likely contributor to recent price falls.
In the EU, the 2010/11 milk year got off to a slow start after very cold temperatures at the beginning of the year hampered grass growth and limited the number of cows put out to pasture. As a result, the usual April peak in milk production was delayed to late May, although milk output has since recovered rapidly in most EU member states.
Price falls in the July New Zealand Fonterra auction for delivery from September 2010 to March 2011 with a 15% drop for WMP and a 12% drop compared to July last year have also contributed to price decreases for milk powder.
Market observers will be keeping a close eye on the availability of cattle feed as the year draws to a close, after high temperatures and dry weather this summer raised concerns over potential losses in feed grain yield in all of the main EU producing countries.
The picture will not become clear until this year's harvest is in, but it is possible that the more stable milk powder prices seen in July were only a temporary respite before a shortfall in feed supply forces prices to rise again.
The dairy industry is waiting with bated breath for the launch of Europe's first dairy futures market in September. The impact it will have on the market for milk powder is yet to be seen but in the meantime EU policy, global demand and the weather continue to be the main driver of price fluctuations in the marketplace.
Milk powder markets appeared to stabilise in July after five months of price rises, as the prospect of increased supply from EU intervention stocks and improvements in milk deliveries put downward pressure on prices.
Prices for whole milk powder stood at about £2,300 per tonne at the end of July, compared to £2,397 in June. Skimmed milk powder prices were also down, to £1,888 per tonne for European product compared with £1,963 in June and a two-year high of £2,149 in May.
July prices for both WMP and SMP remained considerably above 2009 prices, however, with WMP 25% and SMP 20% more expensive than their respective annual average for 2009.
A key reason for the recent price falls is the prospect that the EU might release its stored intervention stocks of SMP into the market. Earlier this year, the European Commission agreed to auction its SMP and butter stocks in a bid to alleviate the tightness of supply experienced by the market during the first four months of 2010. However, it subsequently rejected all the SMP bids it received as too low compared with market prices at the time.
As a result, 192,000 tonnes of SMP remain in intervention as of the end of July and could come on to the market if and when bids reach a level acceptable to the EC, driving down prices for both SMP and WMP.
Increased EU production of SMP, coupled with reduced demand from the world market, has been another likely contributor to recent price falls.
In the EU, the 2010/11 milk year got off to a slow start after very cold temperatures at the beginning of the year hampered grass growth and limited the number of cows put out to pasture. As a result, the usual April peak in milk production was delayed to late May, although milk output has since recovered rapidly in most EU member states.
Price falls in the July New Zealand Fonterra auction for delivery from September 2010 to March 2011 with a 15% drop for WMP and a 12% drop compared to July last year have also contributed to price decreases for milk powder.
Market observers will be keeping a close eye on the availability of cattle feed as the year draws to a close, after high temperatures and dry weather this summer raised concerns over potential losses in feed grain yield in all of the main EU producing countries.
The picture will not become clear until this year's harvest is in, but it is possible that the more stable milk powder prices seen in July were only a temporary respite before a shortfall in feed supply forces prices to rise again.
No comments yet