Arla lowers milk price and increases milk supply

Arla Foods has announced that it will reduce the basis for the milk price by €2,50. The reduction was less significant for the British branch; this is thanks to the exchange rate. It yields a milk price below €35. The Dutch price will be announced on Friday, December 22 and FrieslandCampina will announce its guaranteed price on Wednesday, December 27. It is expected that the milk price will fall by more than €2,50 rather than less.

Milk production high
Good milk prices encourage dairy farmers to keep production high. In the Netherlands, the difference compared to last year is decreasing. Cows are also heading to the slaughterhouse again. It is not clear whether this is the result of the court case that was lost in October, or whether dairy farmers are responding to the introduction of the phosphate rights system.

It does not change the fact that there is still enough milk and the holidays disrupt trade. Transport in particular appears to be a problem and this has caused prices on the daily market to fall. This means that the cream price drops to €4 per kilo ex work. A small decrease compared to the previous weeks. Skimmed milk concentrate also has to lose some of its price and amounts to an average of €600 per tonne of dry matter ex-factory; with a large bandwidth.

Raw milk prices remain at last week's level. From the German angle they already report a cautious improvement for week 1. In week 51, the price in the Netherlands remains at €18 per 100 kilos (delivered at 4,4% fat). The north of Germany costs €3,7 (at 17% fat) and the south €19 per 100 kilos.

Price of dairy products is falling
The market is talking about a bottom, but the stock exchanges and ZuivelNL have not yet been able to substantiate this. For example, the cheese price on the German stock exchange dropped to €2,70 to €2,95 per kilo. On the daily market the price is just below €2,20 per kilo. It appears that cheese production is being slowed down and processors are more likely to opt for butter, cream and/or skimmed milk powder.

In the Netherlands, the butter price fell to €422 per 100 kilos, compared to €4 to €4,35 per kilo in Germany. It is striking that the futures market is posting higher prices again. Higher prices are charged, especially in May and June. It may be an indication that market players expect less milk. The market for skimmed milk powder is also recovering slightly. In the ZuivelNL quotations, the price drops to €130, while whole milk powder increases to €242 per 100 kilos.  

More milk worldwide
The European Union appears to have produced just over 4% extra milk in October. It looks like the increase in November will be in line with this increase. For example, Germany produced on average 4,5% more milk, France 5,3% more, the Netherlands 1,9% more and the United Kingdom 4,3% more. In the US, the plus for November dropped to 1%, mainly due to lower milk production per cow, compared to a plus of 4,2% in New Zealand. Australia recorded the largest increase with a plus of 4,3%.

The milk surplus is therefore increasing further, although growth slowed down again from October to November to a plus of almost 10%. Add to that a little more demand and things aren't looking great. The extra liters prove to be a dangerous game. If demand continues to increase and the increase in milk continues to increase, then there is a good chance that the market can hold up, but with more milk the question is how long it will take before prices start to fall sharply.