Inside: Dairy Market
Strange situation on the German spot market
In the Netherlands, spot milk is stable for the fourth week in a row. However, this does not apply to Germany, where prices are slightly under pressure. Where does this pressure come from, and how do the manufacturers calculate on the dairy market?
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In the Netherlands, supply and demand are reasonably in balance when it comes to the trade in free milk. There are no surpluses. At the same time, the milk supply is ample, and will probably remain that way for the time being. This cuts off the path to higher prices. This results in a quotation of €24,50 per 100 kilos (4,4% fat delivered).
24,50
euro
Germany is declining
In Germany, the spot price for raw milk is declining. Compared to last week, the quotation in Northern Germany drops by €1 to €22 per 100 kilos. A similar decline is visible in southern Germany, where the quotation amounts to €23 per 100 kilos (3,7% fat delivered).
The reason for the decline is an ample milk supply. For example, German milk supply in week 2 was 5,7% above last year's level. It is expected that a big milk wave will occur this spring. At the bottom of the market, prices are quoted that are slightly above €20 per 100 kilos.
Crazy situation
Traders report that German spot milk is now so cheap that even Polish processors are purchasing in Germany. Normally the situation is the other way around. An abundance of milk in France is driving the downward trend in Germany. For example, the French dairy company Lactalis appears to be dumping cheap milk in Europe.
Skimmed milk concentrate is also widely available in France. Given the vicissitudes surrounding it skimmed milk powder the market is trending slightly downwards, although the DCA quotation remains at €850 per 100 kilos (ex factory). A positive signal for the milk price is that the German cheese price has finally hit a bottom (€2.650 per tonne). Because demand in Germany is increasing somewhat, stocks are shrinking.
Cream further up
Positives can only be seen in milk fat, because there is little confidence in the market that milk powders will be able to maintain the upward trend. Compared to current butter prices, cream charges interestingly, which means that the DCA cream price has once again become more fixed in the market. The quotation therefore increases by €50 to €4.450 per tonne.
Due to the expected ample European milk supply this spring, it is not expected that cream and butter prices will be able to maintain their upward trend for long. The price increase is partly driven by short-term obligations that processors have at supermarkets. Failure to meet a delivery obligation often results in hefty fines, which means that some butter producers are now temporarily hunting for cream.
The price in the Netherlands has been stable for a number of weeks.