MMN November 2024 – Milk Market Update

Dairy Commodity Markets

• Fonterra’s latest on-line GDT auction (5^th November) resulted in a 4.8% increase in the weighted average price across all products, reaching US $3,997/t. This follows a 0.3% drop at the previous auction in mid-October. All products on offer sold at higher average prices than the previous auction, except for lactose, which was down 6.1% to $843/t. The biggest rises were seen in butter and anhydrous milk fat, up 8.3% (to $6,990/t) and 4.6% (to $7,558/t) respectively. Full results are available at https://www.globaldairytrade.info/en/product-results/

• The UK wholesale market for dairy commodities has eased from the all-time highs seen for butter and cream in September. Prices are now in decline due to higher milk volumes in September, along with higher levels of fat in the milk. Increased production has come on the back of good grass growth and higher production from Autumn block calving herds.

Source: AHDB Dairy - based on trade agreed from w/b 23^rd Sep - 20^th Oct 2024. Note prices for butter, SMP and mild cheddar are indicative of values achieved over the reporting period for spot trade (excludes contracted prices and forward sales). Bulk cream price is a weighted average price based on agreed spot trade and volumes traded.

• While supplies of butter and cream are still tight there is little product being traded forward given market uncertainty and buyers hope that prices will fall further. Butter stocks are tighter than cream, given that it is more cost-effective to sell cream than process it into butter. Tight butterfat supplies have also been seen in the EU and this has greatly impacted the global markets. While the EU milk supply usually increases seasonably in November and December, it is likely that butter availability will remain tight, partly driven by continuing demand for cheese. In addition, bluetongue infections continue to affect milk output in northwest Europe, although the duration and extent of its impact on milk supplies is difficult to predict, with several control measures in place and use of vaccines.

• The UK SMP price was also down for October, following the trend seen in global markets and expectations of higher milk volumes going forward, both domestically and abroad.

• Mild cheddar bucks the trend with a 4% increase in the average price for the month, and while cheese markets are usually slower to respond to market forces compared to butter or cream, futures cheese prices into next year for both Q1 and Q2 are down.

• With falling prices for butter and cream, it was no surprise that AMPE fell by 1.66ppl for October but MCVE continued to rise by 1.69ppl on the back of the positive movement in mild cheddar price. While the Milk Market Value indicator went up from 45.36ppl in September to 46.38ppl in October, the rise was less than it has been over the last five months. The average Defra farm-gate milk price for September was 43.06ppl, up 1.5ppl from August.

Source: AHDB Dairy

GB Milk Deliveries and Global Production

• Since mid-September, milk production has jumped on the back of more favourable grass growth and grazing conditions, and volumes are now well above this time last year. Daily deliveries for the w/e 26^th October were 33.41 million litres, which is 0.4% more than the previous week and 2.9% higher than the same week last year (equating to an extra 950,000 litres/day). The recent AHDB milk forecasting forum estimates that GB production for the 2024/25 milk year will be 12.28blitres, just 0.3% less than the previous year.