Analysis Dairy

Breather on liquid dairy market, but no peace

The dairy market continues to be in full swing, although the DCA quotations for cream and skimmed milk concentrate fell very slightly this week and butter only saw a small increase. The prices for raw milk continue to rise. In the Netherlands more than in Germany, though.

It is a breather in a liquid market that is at a historically high level. The high prices feel unfamiliar to buyers, sellers, and intermediaries, and there is a strong question about where prices are heading. As a result, there is no peace in the market.

Despite the high prices, the supply and demand situation has not really changed. Milk production is decreasing, product availability is low, and the demand for dairy remains.

It can be heard that especially the retail sector is reluctant to pay the significantly increased prices. There is resistance, but the question is also what the alternative is. Various dairy prices in New Zealand and the United States are much lower, but there is no cheaper product available here. Milk production is declining throughout Northwestern Europe and even in Poland.

Liquid product is inherently very difficult to import from afar, but even a easily transportable product like butter is not easily brought from a relatively inexpensive region, say: New Zealand, here, even though there is a gross price difference of about €1700 per ton and according to traders a net difference of about €600. Importing is also time-consuming.
The alternative of importing more milk here does not seem feasible, as there is not much milk available anywhere nearby. Those wanting freely available Dutch spot milk in the Netherlands pay between €63 and €67 per 100 kilos. Prices are lower in Germany, but German milk cannot be used for every product.

This week, slightly less money is being paid for cream than last week. With prices of almost €10,000 per ton and sometimes more, it seems that a sort of upper limit has been reached.
Skimmed milk concentrate is also cheaper this week than last week. The price for concentrate was so high last week that several milk powder producers decided not to powder their raw material, but to sell it as is. The additional supply of concentrate caused the price to drop.
The price of whey concentrate is hardly rising anymore, but whey powder prices are still increasing.

However, it is not expected that the prices for liquid dairy will really decrease in the near future. Not only is the supply too low, but the increasing cheese and milk powder prices also do not suggest that. This does not rule out the possibility of a correction occurring, but if it does, it will happen from the demand side, not from the supply side.

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