Global butter and cheese prices are likely to remain stable, but skim milk powder prices are still falling, according to the latest Rabobank Global Dairy Quarterly.
The report for the first quarter of 2017 shows butter is trading at near-record levels, but the market is hesitating around currency changes, production levels and limited stocks, Rabobank Global Dairy Strategist Kevin Bellamy said.
“The spread between the elevated butter prices and skimmed milk powder prices – which continue to fall – has never been bigger and continues to widen, although it’s nearing its climax. As farmers slowly respond to higher farmgate prices, production will continue to rise, bringing more protein,” Mr Bellamy said.
Milk production fell sharply in the largest seven export regions fell sharply in the second half of 2016, reaching its lowest point in October (-2.2 per cent).
A rally at the end of 2016 raised prices of whole milk powder by 50 per cent between June 2016 and the end of February 2017.
“Rabobank sees global butter prices remaining firm. They will be needed to maintain margins due to the persistent low value of skimmed milk, which is likely to remain weak, but stable, supported by limited stocks in Oceania and intervention buying in Europe,” Mr Bellamy said.