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Markets Commentary

The Ornua’s Purchase Price Index is 105 for February, down from 111.3 in January, reflecting lower returns for butter, skimmed milk powder and spot product. The GDT Index fell marginally by -0.6% on 6th March. The EEX SMP Index (14/03/18) is at €1297/tonne, a record low. The EEX Butter Index at €4858/tonne is performing well. Milk spot prices in the Netherlands (11/03/18) stood at €28.3/100 kg. The overhang of SMP stocks on the market continues to have a destabilising impact.

EU milk collections in 2017 increased by 1.8%. Milk output flat-lined in Germany (-0.1%), France (+0.3%) and the Netherlands (-0.2%). More significant increases were noted in the UK (4.1%), Ireland (9.2%) and Poland (4.6%). However, output in France has grown by 3%-5% over the past 4 months and German collections have increased by 4%-6% in recent months.

In 2017, EU milk utilisation resulted in increased cheese output (+2%), WMP (+2.8%) and cream (1%). Butter decreased marginally by (-0.4%) and SMP by (-2.6%).

EU exports of dairy products performed well in 2017, with SMP exports +36% year on year (although at low prices). Key markets for SMP were Algeria, China and Indonesia. The EU increased its butter exports to the US by +39% year on year and EU cheese exports to Japan increased by +20% year on year.

In 2017, Chinese dairy imports increased across the basket of products with the exception of casein. Chinese dairy imports were strong in January (WMP +28% year on year), a period in which New Zealand enjoys preferential access to the Chinese market.