Milk powder prices pulled out of their decline in New
Zealand's futures market, while butter values extended their recovery in
Chicago, amid ideas that Europe has gained another yard in a battle over global
Whole milk powder futures for October, the spot contract, rose
1.1% to $3,105 a tonne on Wednesday – their first winning session in two weeks.
In Chicago, butter futures overnight edged 0.2% higher to
251.00 cents a pound, extending to 3.6% their recovery from a low two weeks
The gains followed results of Tuesday's GlobalDairyTrade auction
of physical product which surprised many observers in seeing further gains for values
of dairy fat contracts, while seeing further losses in values of protein-rich
and low fat products, such as rennet casein and skim milk powder.
Butter prices rose 1.2% to set a fresh record high at the
auction of $6,026 a tonne.
And whole milk powder prices at GlobalDairyTrade (GDT) rebuilt
their premium over skim milk powder to $1,202 a tonne, the third highest figure
on records going back past five years.
The average whole milk powder premium over that time has
been a little over $350 a tonne.
'Question of who
The gains in GDT suggested that, for now, the global market
is going the way of Europe, where strength in dairy prices has seen values open
up historically-high premiums over values in Oceanian and North America, other
major exporting regions.
Ahead of the auction, Tobin Gorey, said that "the question of
who blinks on pricing, higher-priced Europe or lower-priced New Zealand remains
After the auction, Mr Gorey flagged that the rise in butter prices,
and a 5.3% jump to $6,764 a tonne in GlobalDairyTrade values of anhydrous milk
fat, "affirms the tight supply of milk fat".
And highlighting in the whole milk powder market that "we
are looking for how the divergence between prices in the EU and New Zealand"
resolves itself, he highlighted too the rise in GDT values.
Latest European Commission data, for September 10, show EU
butter priced at E652 per 100 kilogrammes, equivalent to $7,827 per tonne, with
whole milk powder valued at E312 per 100 kilogrammes, equivalent to $3,746 a
The rise in GDT fat prices also contrasts with a downgrade
last week by the US Department of Agriculture to its forecast for domestic
prices of dairy products including butter.
EU dairy prices, Sept 3, and premium to Oceania, (US) values
Butter: $7,293, +$1,218, (+$1,636)
Cheddar: $4,200, +$187, (+$634)
Skim milk powder: $2,066, +$166, (+$181)
Whole milk powder: $3,679, +$566, (+$317)
Prices in tonnes. Source: European Commission
The forecast for average US butter values this year was downgraded
to $2.355-2.395 per pound, equivalent to $5,192-5,280 per tonne, from a
previous estimate of $2.425-2.465 per pound.
US butter prices "have fallen in recent weeks as export growth
has failed to materialise", the USDA said in a briefing this week, although prices
are still seeing rising well above last year's 2.078 per pound, boosted by firm
demand in the country as elsewhere.
According to the USDA, "tight world supplies and high demand
for products with high butterfat content have driven the rapid rise in butter
"Demand for butterfat products has risen globally due to
consumer perceptions that butterfat is healthier than trans-fat," as found in
some processed vegetable oils.
"Several studies have indicated possible health benefits of
butterfat or lower risk of consuming butterfat than previously assumed."