European dairy markets have steadied this week as Christmas draws closer and buying activity slows.

After rising last week, butter prices held steady at just under €3,600/t. Traders are reporting slightly higher prices for cheddar this week at €3,050/t, while mozzarella continues to trade around €3,150/t.

After weeks of bullish price increases, milk powder markets stabilised this week in Europe. The price of skimmed milk powder (SMP) held steady at €2,600/t, while whole milk powder (WMP) prices were unchanged at €3,130/t.

As we look towards the first quarter of 2020, the outlook for dairy market prices in the spring remains positive. Milk powder markets, in particular, are underpinning this outlook.

In Europe, SMP availability is tighter than at the same time last year as export demand is soaring – mostly from China and other Asian markets.

This time last year Europe was hoarding almost 400,000t of SMP in intervention. We don’t have anywhere close to those stocks this winter yet the export demand outlook for 2020 is quite strong.

At the same time, milk production in Oceania (now in peak months) is subdued. In Australia, milk production continues its sharp decline. From August to October, Australian milk production is down 6% year on year and this trend is unlikely to reverse any time soon.

In New Zealand, milk production has been restrained over the peak months due to poor weather conditions. Reports from New Zealand this week are of heavy rains and difficult conditions.