Buying activity across Europe’s dairy market ramped up significantly this week, with prices for key dairy commodities rising on the back of increased demand.

The pick-up in demand this week is down to a number of factors, but, fundamentally, the market is tight on the supply of butterfats.

Concerns are rising among dairy buyers in Europe that falling milk production over the winter and Brexit stockpiling will lead to a significant tightening of butterfat supplies.

Traders this week reported a definitive lift in dairy market activity and sentiment. Prices for butter, whole milk powder (WMP) and skimmed milk powder (SMP) have all seen a rise this week as a result.

Over the last number of weeks, butter prices across Europe have seen a bounce. Spot prices for butter are trading around €3,300/t (ex-factory) this week. However, buyers in continental Europe are prepared to pay as much as €3,600/t for fresh over frozen.

Spot prices for SMP have risen close to €2,200/t, while the price of WMP has risen close to €2,900/t. On cheese markets, demand is still slightly muted on the back of Brexit, but pricing is stable to slightly stronger. Cheddar prices are holding firm around €3,000/t.

Dairy market sentiment was helped by the latest GDT auction in New Zealand. On Tuesday this week, average dairy prices at the auction rose 2%, with WMP rising 2% to $3,130/t (€2,835/t) and SMP lifted 3.5% to $2,600/t (€2,355/t). Butter rose 3% to $4,130/t (€3,740/t), while cheddar gained 0.5% to $3,845/t (€3,480/t).