No room for a higher spot price for milk yet

When it comes to the European milk lake, Germany and France are the main players. Together they have a share of more than 36% in the European milk supply. It is precisely these regions that recorded a more modest increase at the beginning of December, but again higher pluses towards the end of December. They are approaching the 2015 level again.

Uncertainty is increasing
It looks like the European Union (EU) is entering a second round and testing again how much milk the market can support. The Netherlands does not participate in this. The introduction of the phosphate rights system is expected to slow down milk production towards the summer and perhaps even earlier. However, the new system does create uncertainty and this may be the reason that the market is relatively calm.

Large volumes are not offered and there is not particularly high demand. Sellers prefer not to sell the milk below €25 and buyers prefer the price to be well below that. It yields a stable €24,50 per 100 kilos (supplied with 4,4% fat). This at a bottom of €23 and a top of €26 per 100 kilos.

As mentioned above, more liters of milk are seen in Germany. However, the supply of free milk is disappointing. In the north, the price remains at €23 (supplied with 3,7% fat) and in the south, the price is €24 per 100 kilos. Again, it helps that sellers do not want to sell the milk at too low prices.

Why lower room price?
More action was in bold. Room was higher at the start of the week, but slumped over the course of the week. There was more supply and the average price is € 4,20 per kilo of finished work. One points to less demand and others point to more supply. The butter price dropped a step this week to €410 per 100 kilos of milk. This makes the price reasonable line with the futures market and the bottom cannot be far away.

Protein remains difficult. That trend extends to the liquid market. For example, skimmed milk concentrate comes out at €900 per tonne of dry matter, ex works. There is talk of a lot of offer. Uncertainty about the milk supply mainly affects this aspect of the milk. Because the expectation that a lot of milk will still arrive, makes producers of milk powder cautious.

Prognosis
The gap between the price for free milk and the milk price remains large. The correction for January at DMK and FrieslandCampina therefore generated critical voices, because why was the price for December still kept so high?

The decline started earlier in Belgium, but even there the gap between the milk price and the price for free milk is large. The daily market indicates that the price still needs to fall further. On average, the milk price is still a few euros above the spot price, but it indicates that maintaining a milk price of €30 will be a challenge in the coming months. If processors choose to take the losses, this will delay the recovery later on.