Following months of bullish optimism, the rise in European dairy markets was brought to a halt this week as a number of governments across Europe either extended or introduced new lockdown restrictions related to COVID-19.

The previous optimism around vaccination rollouts and the reopening of society had fuelled positive sentiment among dairy traders across Europe.

However, the fresh wave of restrictions and a slower rollout of the COVID-19 vaccine has dented market confidence somewhat in recent days.

Reflecting this check on sentiment, European butter prices dipped slightly in the last week but remain in a really strong position at just over €4,000/t. European cheese prices also came back slightly but again cheese markets remain in rude health overall.

And on milk powder markets, the price of skimmed milk powder (SMP) increased further in the last week to €2,500/t on the back of strong export demand outside of Europe.

On the supply side, new figures released this week by Eurostat show German milk production for the month of January stood at just over 2.6bn litres, which is down almost 2% on the same month last year. This follows figures which showed French milk production in January was down more than 3% to just over 2bn litres.

This slowdown in European milk supply, coupled with very strong global export demand and the likely reopening of food service markets in the second half of 2021, means the outlook for dairy markets this year remains positive, even allowing for the slower vaccine rollout.