Even though the Global Dairy Trade (GDT) auction this week was effectively flat - registering a 0.4% drop compared with the last auction - it has still been a hugely positive week for dairy markets, with European prices continuing to make gains.

Butter once again leads the way, registering a price just €65/t off €8,000/t at €7,935/t, which is an unbelievable price for butter. It’s a price that wouldn’t have been believed possible just a few weeks ago, but it goes to show the impact of a supply crunch.

Cheese prices are also rising sharply for all types of cheese. Cheddar prices in Europe increased by €250/t this week and there were gains for both whole milk powder (WMP) and skim milk powder (SMP), with increases of €170/t and €50/t respectively.

There is a collective fire burning under European dairy prices at present.

The same cannot be said of the GDT, which was flat this week in recording a slight decline.

In many ways, the GDT got the lift at the last auction, increasing by 5.5%.

If it had increased this week and last week by a combined 5.5%, we probably wouldn’t think anything of it.

The main gains were for SMP increasing by 4.5%, mozzarella by 7% and anhydrous milk fat at 0.7%, while WMP took a dip of -2.5%.

The quantity traded was high at 38,346t, which is similar to the last auction.

The question now is how long much more scope is there for prices to increase further before demand drops? Such high prices for butter is unchartered territory.