On Thursday last week, the European Commission announced it had sold a further 80,400t of skimmed milk powder (SMP) from its intervention stocks for a minimum selling price of €1,555/t.
This means the European Commission has now sold 380,000t of its intervention stockpile and leaves just under 22,000t of SMP still in intervention storage, which is a very positive signal for dairy markets in 2019.
Markets return to normal
The almost entire clearance of the European Commission’s intervention stockpile over the last 12 months means milk powder markets in Europe finally have a chance to return to some normality.
Since the European Commission first intervened in dairy markets in 2016 and began buying up SMP to prop up milk prices, the market price for SMP has plunged to rock bottom levels.
For much of 2017 and 2018, the spot market price of SMP was rooted to the floor at levels below the intervention price of €1,698/t.
However, in recent months, it has become increasingly clear that the European Commission was very close to offloading its intervention stocks and SMP prices have begun to rise to more normalised levels.
Highest level in 18 months
At the end of last week, the spot price for SMP on European dairy markets had risen as high as €1,850/t, which is its highest level in more than 18 months.
With only 22,000t of SMP left in intervention, prices could rise close to €2,000/t or higher in the coming months, which is a more normal price for the product.
The price of whole milk powder (WMP) has also benefited from the clearout of SMP stocks, with spot prices for WMP rising to €2,770/t last week.
Butter and cheese
On the fats side of the dairy market, butter prices have also risen in the last week and are trading in the region of €4,300/t and €4,500/t.
Cheese markets also found some upward momentum, with spot prices for cheddar lifting to €3,000/t.
Prices for gouda and mozzarella increased to €2,800/t and €3,000/t respectively.