A worrying dynamic is evolving across European milk markets this week in terms of the diverging trajectories of dairy commodity returns and farmgate milk prices.

For farmers, the news that Dutch milk processor Friesland Campina and Danish dairy giant Arla Foods both announced a 1c/litre increase in their October milk prices will be a positive.

Friesland Campina lifted its guaranteed milk price for October to 39c/litre in response to what the farmer co-op termed improved dairy market conditions. Arla also lifted its October milk price paid to UK farmers by 1p to 32.5p/litre thanks to higher commodity prices.

However, European dairy commodity prices are headed in the opposite direction this week and market sentiment has now taken on a rather bearish outlook.

Just as Friesland and Arla were announcing milk price rises, European dairy commodity prices were in retreat this week, as markets respond to the good weather over recent weeks and the late flush of forage growth that has helped boost autumn milk supplies.

On the fats side, prices for cream crashed in the last week by as much as €500/t, while butter prices have slid further and are trading no higher than €4,700/t this week. Just one month ago, butter prices were as high as €5,550/t.

Skimmed milk powder (SMP) prices remain weak at €1,600/t for fresh product and will continue to be weighed down by the European Commission’s intervention stockpile.

Cheese markets are faring slightly better with good demand keeping cheddar prices above €3,000/t this week.