Analysis Dairy
Dairy market declines, but does not implode
It seemed this week that dairy prices would plummet after a revival. Especially the butter price has suffered significant losses, but it is too much to speak of a collapse. Cheese prices are following the butter's lead to a lesser extent.
Last week, cracks started to show in the dairy market when only cheese prices were still able to increase. The sentiment weakened drastically earlier this week, partly due to a weaker Global Dairy Trade. Some market participants are concerned that the rapidly rising milk prices could lead to extra production, although not everyone agrees. This led to selling pressure from various trading houses that were afraid the fat market would collapse.
The panic this caused intensified the price drop. However, it can be said to be a storm in a teacup, as the spot market has since found a bottom and is sometimes even recovering.
Significant correction for butter
Looking at the DCA quotations, there are still significant price drops. This is especially true for butter, which drops by a whopping €410 to €7,620 per ton. However, until last week, butter was at a record level, so historically the prices are still very high. The market can rely on tight stocks, which explains why the price drop did not last very long. Nevertheless, it can be considered a significant correction.
Cheese prices decline as well
Cheese prices are also declining due to similar selling pressure as with butter. With a decrease of €225 to €4,605 per ton, the decline for mozzarella is the strongest. This is a seasonal product and given the arrival of autumn, it is logically explainable. Both Gouda and Edam cheese prices also decrease by about €100 per ton. Cheddar is more stable due to extremely tight stocks. However, the foil cheese stocks are also tight. As a result, producers are not afraid of further price declines and feel comfortable increasing milk prices to their suppliers significantly this week as well.
Powder market further weakens
The weaker sentiment in butter and cheese also affects the powder market, where prices slowly continue to decline. Relatively high stocks and weak export demand outside Europe have prevented the milk powder market from making a stand for months. Whey powder prices recently gained ground, but they also have to give in a bit this week.
