The average price of EU SMP between March and May 2022 rose sharply by 19% q-o-q, at EUR 4,091/MT. This price trend was attributed to tight SMP supplies due to weak milk deliveries, healthy domestic consumption, and sustained export demand in relation to SMP supply.
EU SMP output is forecast to be lower for the next quarter (Jun-Aug '22). Lower valorisation of SMP and butter compared to cheese will likely lead to a smaller percentage of milk collection into European dryers, worsened by the projected decline in milk output with the end of the milk collection peak season (end of May). This supply pressure is being aggravated by low EU SMP stocks. In addition, increasing buying interest from oil and gas producing countries is driving up export sales.
However, EU SMP average prices are forecast to slightly decrease in the next quarter, mainly due to weaker domestic demand, as most buyers are covered for Q3. In addition, household confidence has shrunk, and higher inflation has started to erode households’ disposable incomes, thus impacting retail sales of dairy products between June and August 2022. Although limited stocks and tightening supplies could exert upward price pressure, weaker domestic demand is going to be the main price driver, outweighing limited supply.