European dairy commodity prices came under further pressure this week as strengthening global milk supplies are beginning to outweigh the strong dairy demand seen over recent months, according to multi-national financial services firm StoneX.

Outlining the latest market movements to Agriland, Dr. Peter Meehan, senior commodity analyst at StoneX, said:

"The European butter quotation recorded its third decline in four weeks this week while the SMP [skim milk powder] quotation made it three weeks of declines on the trot.

"EEX dairy futures markets have also taken a step lower with EEX Butter’s front six months down 1.4% over the last two weeks and EEX SMP down 2.0% over the same period," Dr. Meehan said.

Continuing, the analyst noted that, from a milk-supply perspective, production for the five main dairy exporters (Europe, US, New Zealand, Australia and Argentina) was very strong in April - up 2.5% year-on-year posting a new record for the month.

It was added that European milk supplies pushed further ahead of last year, up 1.3% for the month.

"Collections for May also look set to remain strong with most of the main milk producers likely to post further year-on-year gains," Dr. Meehan noted.

Looking across the water, the StoneX analyst noted that the UK also continued to see good gains for collections in May (+1.5%).

It’s a similar story further afield, with New Zealand production up 7.6% in May, US production posting another record month, up 4.6% and Argentinian production up 3.4%, he added.

"Looking at the demand side, Chinese trade data is showing their dairy imports remaining extremely strong in May (+59% year-on-year) while New Zealand trade data showing very strong exports in May (+16% year-on-year), most of which is destined for China, suggests this trend will continue into June.

"European dairy exports for April on the other hand were a little disappointing, down 3.6% overall compared with last year," Dr. Meehan concluded.