Butter on EU dairy commodity charts is 50% ahead of the same time last year in terms of price. This time last year, it was heading for €3,500/t and now its heading for €5,250/t.

The move is significant and why milk prices at farm level are 5c to 6c per litre ahead of the same time last year. Skim milk powder is 41% ahead.

Prices for the main dairy commodities are now all trading at between 30% and 50% ahead of where they were this time last year.

The outlier is cheddar cheese that is trading for about 7% to 10% ahead of where it was this time last year. Other types of cheeses are the same.

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.

Labour issue

The labour issue, getting truck drivers and the 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 now and into next year.

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 effect production.

Global demand appears solid, despite slowing retail sales.