According to Freshagenda’s latest Global Dairy Directions (GDD) outlook, fundamentals of dairy markets have improved. Further slowing of global milk output, as the EU takes longer to crawl out of winter, are tightening SMP and butterfat availability. Feed challenges will affect milk growth into H2-2021 and could be far worse if there is a hot summer.

While US milk collections remain strong and stocks heavy, the glut of milk will gradually shrink as producers respond to poor margins, Demand for cheese and butterfat will improve as foodservice outlets re-open. Dry conditions in several other regions – including Brazil, Mexico and lately the UK – will also help slow milk output.

Chinese demand has heavily influenced price discovery mechanisms, lifting milk powder and butterfat prices. Recent rises have and will continue to meet buyer resistance and weaken fundamentals. Butterfat trade was significantly weaker with COVID’s impact on food service demand, but the recent spike in prices testing affordability as activity recovers. WMP demand outside China has also been significantly weaker at prices much lower than current values.