What is holding back Arla's milk price?

After it was announced last week that Arla's basic price has been reduced by £2,16 cents to £27,11 cents per litre, this also puts pressure on the milk price in the Netherlands. For example, the price of fat drops by €0,30 to €3,72 per kilo, while protein drops by €0,31 to €4,11 per kilo. With an annual supply of 600.000 kilos of milk, this results in a basic milk price of €29,22 per 100 kilos, a decrease of €2,40 compared to February.

Protein historically bad
At Arla, in addition to the basic milk price, some (quality) premiums can be earned. This means that in practice the milk price can exceed €30 per 100 kilos. Arla attributes the falling milk price to the price of dairy products, which are currently charging less favourably. Protein in particular puts pressure on the milk price. For example, the price of skimmed milk powder is at a historic low (see graph) and, according to Arla, there is little prospect of recovery.

(Text continues below the chart)The price of skimmed milk powder (Zuivel-NL) is far below the historical average. 

Meanwhile, the cheese price carefully again, while the butter price looks up. However, in general terms, the total price of fat and protein together is lower than at this time last year. Given the price pressure in the protein segment, the milk price will again depend on the value of butter and cheese this year. 

Biological: stable but uncertain
The organic milk price is less affected by fluctuating dairy products, although the prospects are somewhat uncertain. With an annual supply of 600.000 kilos of milk, the organic milk price is €45,65 per 100 kilos.