The contrasting developments unfolding in global dairy markets is truly remarkable. The butter story has been nothing short of phenomenal, with prices soaring more than €2,000/t in price over recent months to reach highs of €6,300/t on European spot markets throughout June and July.

At this week’s GDT auction, New Zealand butter prices increased a further 3% to move above €5,200/t ($6,000/t). This is the highest ever price for butter on the GDT index and almost €2,900/t higher than this time last year.

Without butter, it’s fair to say farmgate milk prices would not be where they are today

The rocketing price of butter is down to supply shortages, but also its resurgence as a fashionable, healthy dairy product with consumers, particularly in the US and EU. Without butter, it’s fair to say farmgate milk prices would not be where they are today, especially given the contrasting prices of other dairy commodities.

Skimmed milk powder (SMP) in particular remains under significant price pressure thanks to abundant global supplies.

GDT auction

At this week’s GDT auction, SMP prices fell more than 3% to €1,755/t ($2,024/t), while, in Europe, Dutch spot prices for SMP have weakened to €1,740/t.

At this level, SMP prices are precariously close to falling below the intervention price level at €1,698/t. The quandary is that for every 1t of butter produced by processors to meet soaring demand, roughly 2t of SMP are also produced as a by-product of this to heap more volume on already bloated stocks.

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