It has been a strange couple of years for Europe’s internal dairy market. In 2017 and 2018, butter prices across Europe spiked at different points to record highs of €7,000/t, which put European dairy prices totally out of line with the rest of the world.

At one point, European butter prices were almost €2,000/t more expensive than New Zealand or US butter.

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Fast forward to today and the roles are reversed. European dairy fats are now priced significantly cheaper than their New Zealand and US equivalents.

On European spot markets, butter is trading at €4,150/t this week.

After this week’s GDT auction, New Zealand butter is priced over €600/t higher at nearly €4,800/t, while US butter is priced almost €300/t higher at €4,450/t.

It’s a similar story on cheddar. European cheddar is trading above €3,000/t this week, which is almost €700/t cheaper than New Zealand-sourced cheddar at €3,780/t and €200/t cheaper than US cheddar prices at €3,300/t.

Irish farmers may question why European prices are so low compared with world markets. However, this is actually a positive development.

Competitively priced European dairy is a boon for dairy exports to countries outside the EU, which will help keep product moving and prices steady.

Secondly, butter priced above €4,000/t is extremely strong in historical terms and cheddar prices at €3,000/t or higher is also very healthy.

Due to ongoing trade tensions and Brexit uncertainty, global demand has cooled recently. Anything that keeps EU dairy moving is good for farmgate milk prices.