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EU wholesale dairy market picked up in August

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Staff Writer | September 11, 2018
The EU wholesale diary market picked up in August as traders returned from their holidays, with some added support from uncertainty around production.
Europe   Most products were up on the month
Most products were up on the month, with SMP up almost 4%, although butter prices dropped slightly, down 1%. Overall the EU milk equivalent value (EU AMPE) went up 1% in August.

SMP pricing on the futures markets showed upwards movement, with settled prices increasing through most of August for contracts expiring in the remainder of 2018.

Settled prices for butter increased in the first half of August but went back down, ending the month in a similar position to the end of July. This raised the average value of milk on the futures market (FMPE) by 3.7% compared to the previous month.

The return to a positive value in the Forward Market Indicator reflects an expectation of tighter product availability later in the year, and potential upward movements in wholesale pricing.

Although EU milk production is still forecast to grow in 2018/19, the hot dry summer and the effect it could have on winter feed costs have dampened down expectations of the size of the increase.

With butter prices already trading at historically high prices, the latest upward movement in the futures market is being driven by SMP. Further sales from the EU SMP intervention stocks and uncertainty over winter milk production mean buyers appear to be willing to pay more to secure product for the final quarter of the year.