Analysis Dairy
Concerns about bluetongue drive dairy prices further
The price for cream was already sky-high, but that doesn't stop the market from continuing to rise. Also, the spot milk benchmark continues to rise this week, as well as skimmed milk concentrate, which also takes a remarkably large step up. The biggest driver in the market is concerns about the limited availability of milk due to bluetongue.
The Dutch milk supply was already 3% below last year's level in July, but this shrinkage could increase further in August. Production declines in other European countries are also expected based on market feedback. The milk supply at the factory gate is very tight, likely due to the advancing bluetongue. Concerns about this currently weigh much heavier than the antidumping investigation that China announced this week for European dairy. The potential effects of this may take months to materialize, as is often thought.
The milk supply is much tighter than dairy producers had anticipated. Companies that are usually active as sellers on the spot market now have to buy additional volumes to meet their delivery obligations. Purchasing liquid dairy is not an impossible task, but it comes with a hefty price tag.
Cream continues to rise
DCA's cream price set a record last week and rises further this week by a whopping €500 to €9,485 per ton. Prices for delivery in the fourth quarter are already above the €10,000 per ton mark. It may work out based on the also sky-high butter prices, but it is expensive. Whether the price surge will continue is difficult to estimate. At the moment, there is a lot of upward momentum in the market, but in the usually volatile fat market, the ball can easily roll the other way. However, significant price drops are not expected based on the tight milk supply and butter stocks. There are sometimes suspicions that stocks are being held by traders for speculative purposes.
Also, spot milk prices continue to rise, in the Netherlands by €2 to €54 per 100 kilos. This further widens the gap from the prices paid out to dairy farmers. It also indicates the direction that payout prices can take, provided the dairy market remains stable. Based on current dairy prices, the raw material value of milk is sometimes already above €60 per 100 kilos, as shown in DCA Market Intelligence's valorization tool.
Milk concentrate takes a significant step
The fat side of the dairy market was already very bullish, but the protein side is slowly gaining momentum as well. This is reflected in rising prices for milk and whey powder, although the stocks in those markets are still substantial. In the liquid protein segment, skimmed milk concentrate also takes a substantial step up this week by €160 to €2,305 per ton. This is the highest level since last autumn. Due to the increase, milk concentrate has suddenly become too expensive for powder producers to dry, but the product receives strong support from the fresh segment.
