European SMP supplies squeezed

Published 6 February 19

Market prices for skimmed milk powder (SMP) have been kept low over the past two years by the large volume of stocks held in intervention stores. Prices have however been rising since the middle of October, finally surpassing the €1,698/tonne buying-in price at the end of December 2018.

This is likely due, in part, to the limited supplies of product available to European markets. Total SMP production from Jan-Nov 2018 was 2% down on the same period in 2017, amounting to just over 113k tonnes. EU-28 production of SMP has been below 2017 levels since April. Falling butter prices, along with relatively higher returns available from cheese seems to have pushed processors into diverting their dwindling supplies of milk into cheese manufacture.

Availability has been further eroded by increased exports, helped by competitive pricing. European exports of SMP were 5% higher on the year (between Jan-Nov), with exports for November alone up 12%.

It may well have been this combination of lower production and higher exports which fuelled the rapid emptying of intervention stocks seen since November.

The absence of intervention stocks could continue to strengthen SMP prices, if exports continue to be price competitive and milk production in key regions remains constrained.

EU SMP Supplies Squeezed

*estimated based on production plus imports less exports. Data does not include intervention stocks