Any expected strengthening of dairy markets has been slow to arrive, with quoted prices rising only slightly. The EEX Butter Index for last week was at €3,013, up about €300 on its weak point in August, but still at the level it hovered at for most of the early summer. The SMP quote, at €1,810 is around €250 above its August low and is also somewhere around its level in early summer. The calculated milk price, on the basis of these quotes would be approximately 23c per litre.

Milk production in the key producer countries has moderated, with New Zealand running at about 7.5% down in September, and 4% down for the season to date. While observers vary in their predictions for the annual decline in New Zealand milk production, and the weather will play a huge part in the outcome, it’s thought that a decline of the order of 5% is priced into the market. US milk production was up by only 0.4% for September, although the January to September supply is still running at 1.4% up.  EU production is running at about 1% up on last year, with strong UK, Irish, Belgian, Danish and Dutch supplies, coupled with a resurgence in Germany and a levelling-off in France.

The Ornua Purchase price Index dropped slightly to 90.1 for October, reflecting a slight tightening in SMP markets, a lag in the recovery of butter prices, and some weakness in cheese markets.

Last week’s GDT auction, as predicted dropped again, with the TWI down by 7.4% and weakness across the spectrum. WMP prices averaged $2,453. The current Fonterra milk price forecast is $4.60 per kg, down from $5.25 at the start of the season, but well up on the $3.85 which was suggested when the market was at its weakest, in August. The expected pay-out, including a dividend, is in the $5.00-$5.10 range.

The US “All Milk” price strengthened slightly to $17.50 per 100 lbs, although with the current strong dollar this equates to around 36c per litre. This emphasises the current competitiveness of US milk prices.