The European Commission punched a big hole in its intervention stockpile of skimmed milk powder (SMP) in the last week, which has added to market confidence that the SMP overhang will be cleared.

On Thursday last week, the European Commission sold almost 42,000t of SMP out of intervention for a minimum selling price of €1,150/t.

In response to the sale, dairy markets have pushed spot prices for fresh SMP higher to almost €1,600/t – the highest since last September. SMP prices reported to the Dutch Dairy Board were almost €50/t higher this week at €1,530/t.

The European Commission has now sold more than 76,000t of SMP out of its intervention stockpile since the start of 2018 – considerably more than the 180t released in all of 2017.

Next month (June) has now become a very important bellwether for dairy market sentiment, as the European Commission will have almost 142,000t of SMP for sale at its next tender event. This is almost half (46%) of all the SMP remaining in intervention stores across Europe.

Should this product find a home, it will ease the overhang that has dogged milk powder markets over the last two years. On the fats side, European spot prices for butter have continued to firm this week as supply remains tight.

Butter prices reported to the Dutch Dairy Board have risen to €6,050/t in the last week, while futures markets are pricing August and September delivered butter at €6,100/t.