You’d have to say that it was another positive week for the dairy trade.

OK, the New Zealand Global Dairy Trade (GDT) index didn’t increase, but nor did it drop and the gains made over the last two months seem locked into the market.

While the index as a whole didn’t change, whole milk powder (WMP) increased by 1.9%, skim milk powder (SMP) decreased by 3.8% while butter decreased by 1.1%. As butter and SMP don’t share the same level of trade as WMP, the index as a whole didn’t change, as WMP makes up such a large part of the 34,111t of product traded.

Closer to home, European spot markets are driving ahead, with butter increasing again this week by €145/t to €5,540/t.

WMP increased by €15/t to €3,660/t, SMP increased by €20/t to €2,640/t, while demand for cheese seems to be finally on the move, with cheddar prices up €175/t to €4,125/t.

So even if the GDT is muted, the European spot market is far more buoyant. This probably reflects increasing knowledge of a slowdown in EU dairy supplies.

As reported in this paper, deliveries to Irish co-ops are back by up to 20% compared with this time last year.

Milk supplies in Britain up to the end of September are back 0.5%, while a big slowdown is reported in Germany also.

Ultimately, it is this tightening of supplies that is driving the upswing in price, as opposed to a big increase in demand. This is both a positive and a negative because supply is volatile and can change quickly. You would have more confidence in a demand driven market.