Spot milk price does not suffer from fear of heights yet

Until the end of August, the spot milk price remained below the limit of €60 per 100 kilos. The basic payment prices that dairy farmers receive had already approached or even exceeded that level. In recent weeks the situation has turned around and spot milk prices are above the payment prices. A signal that free milk is even scarcer than it already was.

70 euros is in sight
The DCA spot milk quotation increased last week by €1,50 to €63 per 100 kilos. A further price increase is in the offing, as some transactions in the market are already approaching €70. These prices are also paid for French milk, which has become even more limited due to the extremely dry summer. At the same time, this price level invites French processors to sell larger volumes on the spot market, as it is easy to make money. After all, dairy farmers in France are barely paid €40, something that is causing much dissatisfaction.

Supply volumes at the factories will continue to decline until mid-November. The imbalance between supply and demand is thus brought to a head. The appetite for liquid dairy (cream and spot milk) is great. This is because processors often have contractual obligations with predetermined export volumes of butter, cheese and fresh dairy. However, the raw material - in the form of milk - must be available for production and delivery. If this does not work, there is a threat of penalty clauses and reputational damage in the market.

Further price increases likely 
It is no exaggeration to say that there is currently a hunt for spot milk. This means that further price increases are in the offing. In recent years, spot milk prices often continued to rise until the milk supply trough, and then at that level until the turn of the year. It does not seem impossible that the spot milk quotation will rise to €70, or so the market thinks. The raw material value of milk does not even remotely permit paying such amounts, but reputational damage is worse.