Powders seem to be on the rebound this week, with a big spike in the price of whole milk powder, jumping €200/t on the European spot market. There was smaller gains for skim milk powder (SMP), but gains nonetheless, as that increased by €100/t.

The results for powders were somewhat mirrored at the Global Dairy Trade (GDT) pulse auction, where SMP increased by €164/t while WMP increased by €78/t.

Interestingly, both of these products are now trading at higher prices than those achieved at the main auction last week. At that auction, WMP was making €3,019/t while SMP was making €2,827/t.

The prices for WMP at the GDT are now a good bit behind the current European price at €3,425/t, while the European price for skim is closer to the GDT prices at €2,875/t.

All eyes are on what is happening to supply, particularly in drought-affected Europe.

There are plenty of indications that French farmers are suffering more than others, with a more severe reduction in supply during the recent heatwaves.

With another heatwave in France and Britain this week, it is likely that further milk supply drops will be imminent.

The big impact though will be around feed. If, as is expected, the maize harvest in Europe is bad, that will mean forage will be scarce. When forage is scarce, farmers have to feed more concentrate to make up the difference, or else sell stock.

The milk price to concentrate price ratio is still probably geared more towards buying the extra feed versus offloading stock, so it is difficult to bank on a guaranteed reduction in milk supply as a result of the droughts in Europe.

Some co-ops in Ireland are seeing milk supplies back by 2% to 4% at present.