EU commodity prices rose between March and July but they fell in August, with lower prices for butter, SMP, WMP and block Gouda/Edam. Whey powder prices have stopped falling but they remain at a level where little profit is being made. Butter prices have fallen by around 5% since early July and SMP prices by around 10-15%. WMP prices have also fallen, partly under the influence of falling world market prices. There is, however, little market activity over the holiday period. Milk supplies are now falling seasonally to the November trough which should bring a better balance between supply and demand but there is uncertainty over the impact of the rise in retail prices and the faltering EU economy on internal demand. But the recent fall in the value of the Euro against the US$ is making EU exports more competitive.

The recovery in butter prices in June, after five months of decline, stopped in July and prices then began to fall again in August, partly because butter exports remain at low levels. Butter prices are now around 35% below their peak in the autumn of 2007. Even so, they are still 5-10% up on prices in May (their low point in 2008). Around 5,000t of butter a week have been going into PSA stocks which stood at 142,000t at the beginning of August, 31,000t up on a year ago. But from mid-August, butter could no longer be put into PSA and butter can now be sold out of PSA onto the market. So there are some concerns about the direction of butter prices. On the positive side, production is falling seasonally, and with the fall in the value of the Euro against the US$, butter exports may become competitive.

Feed grade SMP prices rose by around 30% between March and June only to drop back by 15% in July and August. The animal feed industry is using less powder, but the rate of decline in prices did slow down in August. Food grade SMP prices have largely followed world market trends, rising by around 15% between April and June but falling in July and August as EU powder demand faltered and exports became less competitive. However, the fall in the value of the Euro against the US$ has resulted in EU SMP prices undercutting US supplies, and there are hopes that export demand will revive. Prices are about 45% below their 2007 peak.

The increase in WMP production since March has been largely absorbed by increased exports. Prices have, however, been falling on most markets since early July as demand from the world market has shown signs of faltering. WMP prices are 30% down on prices of a year ago.

Whey powder prices have been exceptionally volatile over the past 18 months, but they remained fairly stable in August, albeit at a level where prices hardly cover the cost of production. The size of the world market in whey powder appears to have shrunk in 2008, and demand from the EU animal feed industry has been lacklustre.

Prices of block Gouda peaked at the end of 2007 but all of the gains made in 2007 were lost by early June 2008. A recovery in prices to the end of July went into reverse and prices started to fall again in August. Some market commentators think that export demand fell back as prices rose. However, the Emmental market has been faring better with price quotations rising over the past two months and prices are now nearly 30% up on those of a year ago.

Euro/kg	AUGUST 2008	1 month before	12 months before
Dutch butter	2.79	2.89	4.30
French butter	2.74	2.77	4.00
German SMP (food quality)	2.20	2.30	3.90
Dutch SMP (feed)	2.01	2.08	3.60
German Emmental	4.20	4.00	3.30
Netherlands Whey Powder	0.40	0.40	1.05

Please note that prices can vary markedly within each market sector: the prices above are intended to give a guide to trends in price changes, but the absolute values experienced in the market place may differ from those shown.