Milk supply is still one of the biggest determinants of dairy commodity trading at the moment.

Yes, dairy demand will likely wane at higher prices and retail inflationary pressures on other goods, not just food.

However, milk supply globally looks set to be down, even more so as we track the monthly supply numbers. Australia and New Zealand have both started their seasonal curve well back on the previous year.

New Zealand this week announced that it is planning to introduce a farm levy on emissions, which won’t go down well with Kiwi farmers.

Some reports suggest it is likely to reduce milk output from dairy farms if current government plans move along expected lines.

Our farmer friends in the US supply over 100 billion litres in a year, but, from January to August 2022, despite the record milk prices, milk supply was back 0.5%.

It may appear to be a relatively small percentage, but it’s a big pool of milk. Remember, US milk price is up 62% year on year, corn price is up 40% and the price of protein (soya beans) is up 27% year on year.

It means it is unlikely US milk supply will increase any further for the rest of the year despite the record milk prices.

Prices for European butter, whole and skim powders eased a little in recent weeks and the GDT auction fell unexpectedly last week. However, cheese has been resilient.

In summary given the dynamics on supply and demand, commodity pricing is still likely to hold through to year-end.