FMP strong for remainder of 2016

Published 20 September 16

AHDB Dairy’s Forward Market Performance (FMP) indicator paints a positive position for the supply/demand balance for the rest of 2016.

FMP is the difference between the EU AMPE and the EU FMPE, where FMPE is the Future Milk Price Equivalent 4 months in advance. FMPE is calculated in the same way as AMPE but using settled futures prices from the European Energy Exchange. We focus FMPE 4 months in advance as this is normally the period where most trade is completed. Both AMPE and FMPE are quoted in Euros to limit exchange rate impacts.

The latest numbers show that, despite wholesale prices increasing significantly over the last month, those trading futures still believe demand will notably outstrip supply for the remainder of 2016.

The gap between AMPE and FMPE has increased over the last month, suggesting that traders believe the imbalance is potentially more severe than they were predicting last month. Information such as increased EU cattle slaughterings, reduced production forecasts and the EU milk reduction scheme are all likely to be influencing buyers’ thoughts on the balance of supply/demand over the coming months. 

FMP 19.09.16

It is worth remembering that FMP does not tell us how much milk prices will change by, but, combined with other market commentary, can give an indication of the potential movement, or trends, in prices. At present, the amount of product traded through the futures market is small.