European spot prices for dairy commodities continued to fall last week, primarily driven by further declines in butter markets.

Spot prices for butter vary significantly across Europe and currently range from €4,100/t to highs of €4,400/t.

Buyer demand for butter is described as tepid right now.

On top of this, the price of skimmed milk powder (SMP) also weakened further in the last week.

SMP prices for fresh product have fallen €50/t in the last week to a range of €1,550/t and €1,600/t, while intervention SMP is selling at €1,230/t.

Below cost of production

The sharp fall in butter prices over the last month, combined with continued weakness in SMP prices, means that market returns from processing milk into a butter/SMP product mix are now below the cost of production.

The worry is that dairy processors will now begin diverting more milk into cheese, which could put pressure on Europe’s cheese market in the months ahead.

Spot prices for cheddar held steady last week above the €3,000/t mark.

However, spot prices for gouda and mozzarella were down €50/t to €2,900/t and €3,150/t respectively.

Thankfully, milk flows are easing across Europe as the milking season moves into its quietest point and could give dairy markets room to reset.