Market News

Cash prices slip while Class III futures nudge higher

A mixed day in the dairy markets on Tuesday: cash cheese barrels, butter and nonfat dry milk prices declined a little while Class III futures increased slightly.

Milk production in Western Europe has slowed as producers pull-back in an effort to get in under quota levels as the production year ends. As a result, supplies of butter, skim milk powder and whole milk powder are tight.  The weaker Euro has also given the E.U. an advantage on any export business there is.  Dairy Market News reports Eastern European milk production is increasing but at a slower rate.  Poland has the highest milk production since 1990 but they are trying to pull-back to reduce quota penalties.

Australian milk production is running just slightly above year-ago levels. They are at seasonal lows although cooler weather has extended pasture life in Southern Australia.  China is buying some Aussie milk, Dairy Market News says for the July-through-December period more than 370 thousand metric tons of dairy products were sold to China, up 1.8 percent from a year earlier.  The biggest increases were in whole milk powder and skim milk powder.

A different story in New Zealand where the government has declared a state of drought on the South Island. It is not as dry on the North Island but milk production is declining there as well.  As it stands right now, supplies are adequate to meet existing commitments but manufacturers are keeping a close eye on production levels and inventories to make sure they do not oversell.  That is evidenced by Fonterra reducing the amount of product is has been offering on the Global Dairy Trade auction.