SMP prices prevent global commodities reaching peak

Published 25 September 18

Global commodity markets have been following a rough three-year cycle for over a decade, but the latest peak, expected in 2017, failed to materialise. The chart below shows an estimate of the milk equivalent (AMPE) for selling butter and skimmed milk powder (SMP) on the world stage. While the industry encountered an extended trough through 2015 and 2016, the recovery since that date has been slower than normal, and muted.

If we break the calculation for AMPE into its separate components, we can see that for the peaks in 2007 and 2014, SMP was the main driving force behind the increases. In 2011, it was both butter and SMP that lifted AMPE. However, in 2017, the exceptional increase in butter prices was not enough to offset falling SMP values, leading to a slow and gradual overall increase in AMPE.

Global SMP prices continue to be held back by the large quantities of powder in stocks, including EU intervention stores. While the EU is making inroads into this stock, there is still around 250k tonnes remaining.