European dairy markets continued to improve this week, as buyer activity ramps up. Prices for key dairy commodities lifted further this week, as the supply of butterfats in the European market remains tight.

Butter prices reported to the Dutch dairy board increased to just under €3,500/t this week, with significant premiums sought for fresh product over frozen. On powder markets, the price of skimmed milk powder (SMP) jumped strongly this week to €2,250/t, which is the strongest price for European SMP in almost five years. Cheese markets remain stable this week, with cheddar prices trading around €3,000/t.

Meanwhile, the 2019/20 milking season is off to a good start in New Zealand, with early signs that milk production is ahead of last year. On Monday, the New Zealand dairy industry published figures showing milk production in August stood at 1.35bn litres, which is almost 1% ahead of the same month last year.

This brings milk production in New Zealand for the first three months of the 2019/20 milking season, which runs from June 2019 to May 2020, to a combined 1.8bn litres. This is 3% ahead of milk production for the corresponding period last year.

In neighbouring Australia, milk production continues its rapid decline. For July, Australian milk production plunged more than 8% year on year to 600m litres.

For the 2018/19 milking season in Australia, which runs from July to June, milk production plunged almost 6% year on year to just 8.8bn litres.