Inside Milk
Low milk supply creates solid undertones
The dairy spot market is characterized this week by flat price movements and a fixed undertone. While the milk price at Dutch milk processors remains at a reasonable level, the dairy cooperatives in New Zealand are lowering the milk price forecast.
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The dairy market reacts with some surprise to the fact that dairy processors do not or hardly (FrieslandCampina) correct. How to choose Arla en DOC Cheese to keep the milk price the same; in the case of DOC Cheese, the raw milk price is €35,70 per 100 kilos (based on 4,41% fat and 3,47% protein).
Declining milk supply
That surprise comes from the fact that the payout prices are at least a few cents too high, relative to the levels of basic dairy products. In any case, the flat mutations are a boost for dairy farmers and at the same time probably an incentive to maintain milk production. The declining milk supply in Europe is becoming more and more noticeable.
Although the milk supply is seasonally in a trough, the differences in some countries (compared to 2017) are quite large. For example, the supply in Germany has been 4% to 1% below last year's level for 2 weeks. In France, the difference even rises to 5%. Processors in the Netherlands also speak of a low supply. This is a starting point for the milk price for the first quarter of 2018. There is no upside potential, but it can moderate the downward pressure somewhat.
Quiet spot market
It has been quiet on the spot market this week, partly because there are public holidays in Germany (31 October Reformation Day and 1 November All Saints). Spot milk is requested in southern Germany, causing the DCA quotation to rise by €0,50 to €37 per 100 kilos. In the Netherlands and northern Germany, the listing will remain, which is a thin market.
The fat market is somewhat nervous, but the DCA cream price remains at €4.500 per tonne. The price of skimmed milk concentrate shows a slight increase from €20 to €1.450 per tonne. The undertone is expected to become stronger as a result of Christmas.
Westland lowers milk price
Following on Fonterra Westland, New Zealand's second largest cooperative, has lowered the milk price. The milk price forecast (season 2018/2019) has been reduced by NZ-$0,40 to a range of $6,10 to $6,50 per kilo of milk solids (MS). The milk price is expected to be in the middle of this range.
The correction is a result of the ample milk supply in New Zealand, due to an early spring at the other end of the world.