It was a bad week for dairy markets this week, with all of the main commodities falling in price - and falling dramatically.

Whole milk powder (WMP) took the biggest hit, falling by €110/t. Butter also took a hit, but, unlike WMP, butter prices had started soaring in early February and have lost about half of that gain now.

However, WMP didn’t soar to the same degree, so the drop now is a bigger hit to the trade.

Skim milk powder (SMP) fell again this week, for a total of €175/t over the last two weeks.

The above prices are all based on the European spot market, but it was a similar outcome at the GDT pulse auction, where SMP dropped by €129/t and WMP dropped by €96/t.

Both prices are lower than the prices attained at the GDT auction last week.

It’s uncertain as to what is driving this downward spiral. There is no real change in market dynamics, with weak supply a feature across Europe and the US.

For January, the US was down 1.1% compared with January 2023 and supply in France was back 0.28% compared with January 2023, but overall supply in France was back 2.63% for 2023 compared with 2022, so there is the cumulative effect of lower supply.

New Zealand milk supplies in February were up a significant 6.5% compared with February last year, but that was expected because the weather was better than forecast.

It doesn’t take much to spook markets now, but the feeling is the price volatility is being driven by sentiment and taking positions on the futures market rather than core supply and demand.