Butter prices broke through the €5,000/t threshold on the Dutch spot market last week as the trade for dairy commodities continued to strengthen.

The Dutch spot price for butter has increased by €700/t over the last two months, with the market for skim milk powder (SMP) up 16.5% since August to €2,600/t.

Forward prices for dairy commodities have also hardened over the last six weeks, amid mounting fears of tighter milk supplies in 2024.

John Lancaster of StoneX Group estimated that forward prices for butter, powders and cheese were up more than 10% since September.

Although forecasts of a 1% rise in New Zealand milk output “took some wind out of the sails” of the recovery last week, Lancaster said a “significant premium” had been built into dairy commodities for the first half of 2024.

Rabobank is also forecasting a more positive outlook for dairy markets in 2024, with dairy analyst Richard Scheper predicting that there is more “upside potential” next year.

Scheper pointed out that consumer demand had improved on the domestic European market and on the export front, and this provided scope for milk price improvements into the first half of 2024.

The Rabobank analyst said stronger demand on European markets was due to a combination of lower prices and reduced inflation.

Meanwhile, ICMSA dairy chair Noel Murphy said the improved dairy sector outlook should be reflected in a 2c/l lift in milk prices for October.