Prices for the main dairy commodities are now all trading at between 25% and 30% ahead of where they were this time last year. The outlier is cheddar cheese that is trading for about 10% ahead of last year.
The traditional supply-demand fundamentals are still leaning in favour of a strong market for the next few months.
Strong demand against a backdrop of modest supply growth will continue to drive the market. The labour issue, getting truck drivers and gas shortages have probably further influenced market sentiment on the milk supply differences between regions.
Chinese demand and global supply chain challenges are the three biggest sentiment variables over the next quarter.
Global milk flows have been muted for the past two months and growth will be modest for the remainder of the year.
Most farm input costs continue to firm and inflation will be a key variable over the next 12 months and input costs will rise, so it will affect production.
Global demand appears solid, despite slowing retail sales, and buyers are fearful of weaker supply during the quarter four and quarter one demand periods next year.
Cheddar pricing, while behind other commodities, has increased on international markets in recent weeks due to strong retail and export demand, with food service improving. Powder demand is exceptionally strong across all categories and rising oil prices will offer support.
Weaker flows in butter-producing nations, coupled with strong fresh cream demand, has seen butter pricing rise in recent weeks. Futures suggest it could firm further. All points to a strong autumn for milk prices.