News Dairy
Clearance of milk powder stagnates
The sale of milk powder from intervention showed a sharp decline in July. This is accompanied by a small reduction in the lower end of the price. There were more offers, but they were at lower prices. This results in a modest decrease in the many tons of milk powder that are in intervention.
The rising prices on the dairy market could ensure that sales of intervention milk powder increased steadily up to and including May. However, this already changed in June and the volume sold fell to 23.532 tons, just short of halving compared to 1 month earlier. About July sales drop to 2.408 tons.
Low bids
26 bids were made, covering a total of 27.768 tons of milk powder. Of those bids, 7 were able to go through after the European Commission (EC) decided to set the minimum selling price at €1.125 per tonne. In the previous month, the bid range was between €995 and €1.400 per tonne. The lower end of the price was then set at €1.195 per tonne, causing 23.532 tonnes to change hands. It indicates that it majority of the bids in July was below the fixed price.
In 2018, a total of 102.292 skimmed milk powder was obtained from intervention; to that will be added the 180 tons of 2017. In total, about 316.851 tons remain. If the average sold volume of 2018 is calculated, then another 21 months are needed to clear up the milk powder. If it's based on last sold volume, that's 131 months left. The total value based on the last price is €356 million. That is a loss of almost 30%, compared to the price at which it entered the mark-ups.
Why lower sales?
It is not immediately clear what caused the stagnation. Is it because of the holidays, has the sentiment in the market turned, or is the animal feed sector a buyer and has it now met its needs? The tricky part is that the milk powder in intervention has different contents than the milk powder for animal feed. In order to make sure the contents are correct, you have to add them, which incurs costs. This means that the bids (if there are any) from this angle are automatically lower.
A lot still needs to be done to make stocks disappear. More interesting is the question: when will stocks be low enough to give players confidence that they can disrupt the market only minimally? However, that level will no longer be found in 2018 if sales do not increase quickly. Of the total volume of milk powder, 54% is in the storage of France, Germany and Belgium.
There is a visible stagnation in the sales of milk powder.
Herman van den Pol
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