European dairy markets continue to show upward momentum as we move further into spring. The recent cold weather across much of Europe has stalled milk supply volumes in big producing countries such as Germany, France and the Netherlands.

However, as the weather improves, milk supply is likely to begin to rise again in key producing regions. Additionally, increasing milk prices right across Europe will also incentivise extra milk output from some countries.

New figures released this week by Eurostat show German milk production was firmly in retreat in the final quarter of 2020, while French milk supply showed a similar trend.

Regardless, European dairy markets are still in robust shape. Some dairy traders are reporting higher prices from supermarkets for butter, cheese and liquid milk in a number of large EU markets. This week, European spot prices for butter increased to €3,650/t, while cheddar prices held steady at a healthy €3,250/t.

On the milk powder side, the price of European sourced whole milk powder (WMP) increased to just under €3,000/t, while SMP prices were static just below €2,400/t. Despite threatening to move higher, the European price of SMP has struggled to rise above the €2,400/t mark for the past month.

Even the recent large-scale tender purchase by ONIL, the Algerian milk powder importer, was not enough to lift European SMP prices higher.

A spring flush of milk may still emerge across Europe, but, so far, the signs are positive that EU milk production will be somewhat subdued in the first half of 2021.