Milk price is still open for this summer

With May approaching, the peak in milk supply is approaching in the Netherlands. In France the peak is now behind us. Cautiously, buyers for raw milk are coming forward again from France. France has mainly had surpluses in recent weeks. Italy is also on the market, only for cream. Skim milk concentrate has probably reached the bottom.

Spot market milk
An extraordinary week with little trading activity, is how traders describe the spot market for raw milk in week 15. Processors are experiencing disruptions here and there, resulting in a fraction less processing. The fact that Easter Monday is not processed also reduces the desire to buy. Selling milk on the spot market is also not interesting given the current milk prices. This makes it difficult for buyer and seller to find each other.

In the last week before Easter there are always bargain hunters who speculate on a price dip. That hardly ever happens. In the Netherlands, the spot price for raw milk loses 50 cents and falls to 31 euros, with a wide bandwidth. Northern Germany has a minus of one euro to 28 euros. The south of Germany will also drop one euro to 28 euros.

There is a wait-and-see attitude on the spot market. With the current cheese, whey and butter prices, excellent margins can be made. That stimulates demand. However, the supply is increasing. Relatively many processors have not yet covered the supply for May and June. There will still be no processing days in May, so dairy farmers will probably be able to manage. The market offers potential for the months that follow. The condition is that the manufacturers continue to move at the current levels.

Temporary revival for cream?
Cream has limited availability in the market this week. Many processors have delivered because of Easter. However, the demand after Easter is fine. The asparagus season provides price support and there is also good demand from Italy. The DCA cream price almost reverses last week's dip, given the price increase from 150 euros to 5.150 euros per tonne. It is still uncertain whether demand will continue to increase. Historically, the price of cream falls when milk supply increases (see graph). This also has to do with the switch to the outdoor season. This causes the quality to temporarily decline slightly. 

The Netherlands may supply less milk, but sufficient milk remains available from surrounding countries. This means that buyer and seller do not agree on price in the longer term. The cream price is moving well above the long-term average (see graph). This makes the outlined potential for milk prices somewhat uncertain.

Skimmed milk concentrate on the bottom
A positive starting point is that the price of skimmed milk powder has probably reached its bottom. This week the quotation will drop by 50 euros to 1.250 euros per tonne. Volumes are growing well and prices are higher in surrounding countries. In Poland, for example, 1.500 per ton is paid. Between Eastern and Western Europe the range varies between 1.500 and 1.200 euros. The further east, the higher the price.

On balance, it is a market of assumptions, expectations and uncertainties. Dutch processors are not concerned about disappointing supply. Better to have less milk than to have to process loss-making volumes. In terms of supply, sales and prices, everything is still open for the coming months. This makes free milk on the spot market extra interesting to follow.