Inside: Dairy Market
Approaching autumn determines milk price in 2018
There is a thin spot market for raw milk, with extremely different prices. Both buyer and seller are looking for the right price level. As autumn approaches, the market is entering a crucial phase that could make or break the milk price for 2018.
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The dairy companies keep their cards close to their chest and prefer to process their milk supply themselves. This results in a thin milk market, where trade in the Netherlands is at the top end at €45 per 100 kilos. At the low end, prices are around €40 per 100 kilos. The wide bandwidth is partly a cause of disruptions and maintenance among dairy farmers. This meant that buyers of raw milk were able to grab 'great opportunities' at the beginning of the week.
The DCA spot price for raw milk drops by €1 to €43,50 per 100 kilos (at 4,4% fat, delivered). This is a better reflection of the market, but not a harbinger of a downward trend.
42
euro
Outliers in Germany
Good French demand supports the spot price. In France, spot prices are fairly comparable, only at 3,7% fat. Dutch milk can therefore easily be stored in France.
According to German traders, all prices between €40 and €46 per 100 kilos of milk have passed this week. On balance, the German price, both in Northern and Southern Germany, remains at €42 and €42,50 per 100 kilos (3,7% fat, delivered) respectively. Partly thanks to a good Italian question.
Intervention scheme ends
The price of skimmed milk concentrate is under pressure due to the approaching end of the intervention scheme for skimmed milk powder. The scheme will close at the end of September and the European market will then be completely at the mercy of world market prices. The ZuivelNL quotation for skimmed milk powder fell this week by €60 to €1.660 per tonne.
The DCA quotation for skimmed milk concentrate also drops by €60, bringing it to €1.500 per tonne. Buying interest arises again from €1.400 per tonne.
Cream is still attractive
The DCA cream price rises to €7.900 per tonne. Due to the noise about extra production and more inventories, buyers thought that the downward trend had started. In the context of: "The wish is the father of the thought." The opposite happened. In Germany, if all goes well, cream prices will reach €8.000 per tonne.
Poland makes or breaks the cream price. Due to the leveling off of cream prices in recent weeks, Polish processors immediately came up with additional supplies to avoid further price reductions. Butter producers then bite again and that gives the cream price body. The fluctuating cream price keeps trading competitive.
Spot market crucial for milk price
The spot prices for dairy products will be crucial for the milk price in 2018 in the coming months. If milk fat remains popular, resulting in high cream and butter prices, it is likely that the annual contracts for 2018 will be concluded at higher levels. If the cheese price also remains stable, that gives enough perspective for a good milk price in the first 2 quarters of 2018.
It is not possible to look any further ahead. A good milk price comes with the risk of extra milk supply. Some parties are optimistic about prospects. Others predict declining spot prices in the fourth quarter. 'Slightly nervous' and 'unpredictable' are the words that perhaps best characterize the market.