On the supply side this week, we learned that New Zealand produced less milk in October when they are at peak milk supply, down 3.5% compared with the same month last year.

So while milk price is exceptionally good in the New Zealand context, it still didn’t mean more milk at farm level because of weather, feed and management.

This backs up Fonterra’s revision of lower milk solids over the full year. So while we eventually saw an increase in European milk supply from higher prices, the New Zealand production year has started from a lower base and, when you start lower, often it is harder to make up lost ground.

No doubt the challenges of environment and climate legislation in dairy farming in New Zealand are kicking in and reducing output and maybe even reducing cow numbers in the next few years by 15% to 20%, depending on what report you look at.

The price of powders is well back in the last three months from well over €5,300/t to below €4,200/t. On the upside, this means it is more competitive now and could help demand.

On the downside, it is likely a correction on higher prices is in the post for milk price in the new year.

It’s fair to say the dairy market has been hit across the board in recent weeks, fuelled by high inflation rates. Cheese prices are now the highest, as milk powder prices were already strongly depreciated in October. The market is still struggling, even at the lower prices. The weekly quotation of skimmed milk powder has slipped under €3,000/t.