Analysis Milk
Liquid dairy drives market further up
Liquid dairy is once again the place where it's happening in the dairy market. Once again, the DCA Benchmark Prices for raw milk and especially cream are on the rise. Skim milk concentrate is also participating, but with a bit of a brake on it. In the wake of the cream price, the DCA Benchmark Price for butter price is also rising.
In broad terms, it is still the same factors that are responsible for the upward price movement: a lagging supply of milk in general and particularly of milk fat, while there is indeed a good demand for this product.
It's not just butter that is in high demand, but also full-fat cheese and yogurts with extra fat. Bakers also have a great need for butter. Ice cream manufacturers, despite the high prices, also demand a lot of milk fat, often in the form of cream.
Given the current milk supply, it may take a while before the tightness in the milk fat market is over. It may not be until around the turn of the year that the low point in milk supply is truly over. The fact that Ireland and the United Kingdom have a good late season currently provides some extra supply from there, but it is not enough.
The same goes for butter that is on its way from New Zealand. That product is much cheaper than European butter - currently around €1000 per ton - but the supply is too small to really calm the market.
For the dairy farmer, the rising market for liquid dairy is good news. It provides some extra support to the milk price. However, more is needed in the longer term. The markets for milk powder and cheese also need to rise.
Last week, the cheese market looked fairly promising. Block cheese prices rose again. This week, things are a bit sluggish again, and the spot price is moving in the opposite direction. The same is happening with many other types of cheese.
On the other hand, the milk powder market is looking slightly better again, at least when it comes to skim milk powder, the largest product in this market. Skim milk powder is showing a slight price increase, but exports are still not smooth. There is still too little demand, and it doesn't matter much that Europe is currently the cheapest supplier on the world market. Without demand, there are no sales. Prices for whole milk powder and whey powder are still falling.
