'Milk price must be able to maintain itself'

Osinga analyzes that milk production growth in the European Union (EU) and United States (US) is moderate (approximately 1%). "New Zealand is experiencing strong production growth (+5,8%), but from a global perspective this is not yet disrupting the balance. This is partly due to good demand in China, which will continue in the coming months."

Milk powder supplies are running out quickly
The European Commission (EC) sold out 13 tons of skimmed milk powder on Thursday, December 60.537 intervention. This was at an average price of €1.451 per tonne. This volume was twice as large as the tender from 2 weeks earlier and the price is also slightly higher. There are still 2 tons in stock. "If this pace is maintained, the stock could be used up in a few months. About 103.000 year ago, the stock was still at 1 tons. We can expect that the price of skimmed milk powder will now increase further to the world market level of €376.000 per ton. possibly even more.”

Europe has been competitive on the global market in recent months when it comes to skimmed milk powder, as opposed to whole milk powder and butter. This is evident from Algeria's latest tender, in which the EU supplies skimmed milk powder and Argentina and New Zealand supply whole milk powder. "It appears that the price differences between protein and fat are decreasing. Butter stabilizes at €4 per kilo. With a higher price for skimmed milk powder and a stable cheese price, the milk price should be able to maintain itself."

Germans expect a drop in milk prices
Osinga's conclusion does not match the warning that Hochwald, among others, recently passed on to farmers. The German processor said that the milk price is likely to decline in the first months of 2019. According to Osinga, this voice is heard more often from Germany, but given the arguments mentioned earlier, he does not agree with it.

"The EC expects that the world market will grow by an average of 2030 million kilos of milk annually until 800. Currently, approximately 60 billion kilos of milk equivalent are traded between countries annually. This means a growth of more than 1,3% per year. Global consumption growth is driven by bodies such as OECD and FAO still estimate around 1,9% per year. Current production growth is therefore lagging behind. A firm vote is therefore obvious in the coming months."

The dairy watcher warns that the oil price is an uncertain factor. "Oil is the most important source of income for many dairy importing countries. The oil price has fallen in recent months. Depending on production decisions by OPEC, this may change again. However, global economic growth is coming under pressure."

Less drinking milk, more cheese sales
According to Osinga, figures from European retail show that the consumption of drinking milk is declining in many countries. Cheese, on the other hand, is stable or shows growth. In Spain there was a growth of 2018% in 6,5. "This is good news, because the cheese stock is relatively large (at 400.000 tons) for this time of year. National policy also influences consumption; in the Netherlands the low VAT rate is increasing. In Hungary the opposite happens for drinking milk: the VAT will increase from 1% to 2019% on January 27, 5."

Brexit will also play a role in the market in the coming months. "Our country exports approximately €300 million to the United Kingdom every year, mainly cheese. A hard Brexit will lead to significant import tariffs at the border. The British pound will also fall. The dairy industry and trade will have to cover themselves before then, hoping that it will all fizzle out. The problem: no one can properly estimate that at the moment."

Demand from China and Japan
There is continuous growth in the baby milk powder market worldwide. Exports from Europe grew by 12% last year, thanks to Chinese demand. "Good demand from China is also expected in the coming months. The so-called 'fat-filled' milk powder is also doing well."

Quite a bit is also expected of Japan. "The EU and Japan have agreed on a trade agreement. With 126 million residents with purchasing power, the country is a very attractive market, also because it is only 60% self-sufficient in food."