Bright spots brighten up the dull dairy market

Most market participants have factored in the continued pressure on the butter and cheese market. No turnaround is expected until September. Producers are trying to limit the price damage, especially since milk prices remain relatively high, despite the decline already underway.

Weakness at the front
The DCA butter price is falling below €7.000 per tonne this week, for the first time since February. A lack of demand is holding the market back. Stocks are not very high, but sufficient to meet current needs. A recovery in demand is expected in the autumn. The weakness is mainly at the front; further ahead, prices are moving at a slightly higher level. Therefore, producers are confident enough to produce butter at current cream prices. The price of cream is falling by €100 this week to €7.820 per tonne. There was ample supply on the market this week, partly due to factory maintenance. In addition, the milk supply is better than expected, thanks to the growing weather in recent weeks.

Spot milk dips below 50 euros
The above also puts further pressure on spot milk prices. The price for the Dutch market has fallen by €1,50 to €48,50 per 100 kilos. Despite falling payout prices, the negative gap continues to widen. This is remarkable, as spot milk prices usually exceed payout prices as the trough of milk supply approaches. This is likely due to the relatively high milk prices of €55 per 100 kilos.

No bottom yet for cheese prices 
As with butter, pressure on cheese prices continues. A lack of retail demand is the biggest hurdle. Foil cheese stocks aren't very large. According to insiders, this is a different story in the premium branded cheese segment, which is reportedly quite ample. Natural cheeses are also coming under some pressure. This is partly due to falling milk prices at factories, which are sometimes linked to contracts, according to market figures. The cheese market is generally expected to reopen in September, when demand picks up and milk supply has shifted further towards the seasonal low.

Liquid whey is scarce
There's some uncertainty about how much milk is currently being sold as cheese. Liquid whey remains in short supply, leading to further price increases. The DCA price rose by a substantial 17,5% this week to €705 per tonne. Liquid whey has been steadily increasing since this spring. The limited availability signals that cheese production isn't operating at full capacity. On the other hand, there's good demand from the livestock sector, which is also driving up prices.

Whey powder more attractive
We're also seeing higher prices for whey powder feed this week. Furthermore, the current price of skimmed milk powder for feed is higher than for food-grade products. In other words, sales to animal feed are better than in the human market. Generally speaking, the milk powder market is still characterized by high inventories. Whey powder inventories are relatively tighter, making this market somewhat more attractive.