The positive news over recent weeks from multiple pharma companies about the efficacy of their respective vaccine trials for COVID-19 have given a much-needed boost to market sentiment right across financial and commodity markets.

The development of a successful vaccine against COVID-19 has greatly improved the outlook for 2021 and markets are betting on a return to a more normalised way of life next year.

This positive outlook for 2021 is probably best illustrated in the recent recovery in the global price of oil.

Since early November, the price of Brent crude oil, the global benchmark, has risen by $10 and has been consistently trading close to $50/barrel in recent weeks.

With oil prices at this threshold, the question is will the improved returns and outlook for oil economies in the Middle East and Africa drive better prices for dairy, particularly milk powders?

Oil economies account for about one third of all global dairy imports, so they play a key role in setting market sentiment for dairy. A strengthening oil price could help boost returns for milk powders, as these countries suddenly have more buying power.

It is therefore no surprise that ONIL, the Algerian state body for importing dairy products, stepped into the market in the last fortnight and hoovered up as much as 40,000t of milk powder from global markets.

On the back of this, European spot prices for SMP increased again this week to €2,150/t, while WMP prices increased to €2,750/t. These are positive developments ahead of the 2021 season.