The dynamic in global dairy markets is interesting right now. In Europe, member states are pushing more product into export markets, particularly butter and cheeses. From January to May, EU butter exports are 36% ahead of last year, while cheese exports are 15% up year-on-year.

The strong increase in export demand for EU butter is coming from markets such as Saudi Arabia (+34%), Egypt (+30%) and the US (+23%).

At the same time, EU cheese exports are lifted due to increased export trade with Japan (+11%), Saudi Arabia (+43%), South Korea (+29%) and Algeria (+33%).

And it is this strong export demand that has helped European butter prices to soar almost 20%, or $530/t in value, since the beginning of May to sit at $3,300/t last week, while butter quotes from the Dutch Dairy Board have risen a further 2% this week.

In contrast, the latest GDT auction highlights just how much of a drag the overall weakness in milk powder prices remains on dairy markets.

The result from Tuesday’s GDT auction was flat and the benchmark dairy index is really struggling for upward momentum.

Despite a 1.9% increase in the average price of whole milk powder to a little over $2,000/t, declines in the price of skimmed milk powder (-1%), butter (-5%) and cheddar (-1%) all combined to keep the GDT flat.

More than any other dairy commodity, milk powder prices are exposed to the vagaries of the oil market.