Globally, milk output and product stocks indicate solid demand for butter and cheese, with sluggish demand for protein powders. Why the sluggish protein demand?

Protein markets remain depressed with high (but ageing) skim milk powder (SMP) stocks continuing to overhang the market. Butter and cheese markets have stabilised after collapsing in the autumn and are said to be firming due to improved demand and buying activity. Butter price is down from the highs of 2017, so some correction in milk price is expected (as per Lakeland price drop for January), but it is still trading well above where it has been on the five-year average.

So what is happening in the US on supply, demand and currency? Milk supply in 2017 finished +1.7% year on year, slightly less than anticipated and this was weather-related.

In terms of demand in North America, domestic butter consumption remains high historically. The price of a tonne of US butter is about €3,700 due to record stocks, while EU prices have firmed up to €4,200/t.

Cheddar and powder demand have been sluggish. US cheddar prices are back €200/t on EU prices at €2,700 versus €2,900/t.

On currency, the US dollar is the weakest it’s been in more than three years, down more than 7% compared with the euro since November and December and fell further this week to under 81 cents. A weaker dollar makes imported dairy more affordable in big importing countries. However, it also boosts the competitiveness of US exporters.

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