Inside Milk
Tight milk supply drives spot price up
The dairy market is characterized this week by a fixed cream price, where the Dutch spot milk price is higher. Meanwhile, the outlook for the first quarter of 2019 is becoming increasingly clear. How are those?
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The spot market for raw milk has been characterized by thin volumes for some time, due to the low milk supply. Several dairy companies are short of milk and that is fueling purchasing interest. The DCA quotation for raw milk increases by €1 to €36,50 per 100 kilos (4,4% fat, delivered). There is also little volume in Germany, but the quotations are not increasing.
In the short term, demand for cream is good, due to production before Christmas. The DCA room price remains stable for the fourth week at €5.400 per tonne. During the week, cream prices fluctuated somewhat, but the trade keeps moving back to this level. Although the undertone is solid, there is no (much) upside potential. This is due to the pressure on butter prices.
Ample butter stocks
Butter stocks in Europe are larger than expected and that puts pressure on prices. The Dutch butter price (ZuivelNL) remained stable at €4.300 per tonne, but corrections are in the air. After the New Year, demand often weakens; For the first quarter of 2019, the question is whether the price can remain above €4.000 per tonne. Based on futures market butter (EEX) the butter price can be expected to hold up.
There is a problem on the cheese market trend break. The bottom of the German cheese price (Gouda 45) fell this week by €100 to €3.050 per tonne. The undertone is weaker, although prices are not expected to drop significantly. In terms of milk valorisation, cheese remains interesting, which means that a relatively large amount of milk will probably continue to flow into the cheese bin.
This could release pressure on the fat market, while also limiting the supply of skimmed milk powder; partly due to demand on the world market (China). The expectation is that the upward trend will continue towards the first quarter of 2019, although one must beware of too much optimism. The market seems right to her negative character to lose, now that intervention stocks have fallen substantially.