Milk increase forces DCA spot price to kneel

Raw milk has been in limited supply on the dairy spot market for months. Only processors who were in need of volume purchased additional supplies. However, the availability of milk is increasing because milk production increases seasonally. Although milking is still less in the Netherlands than in 2018, production in Germany is already a few weeks above last year's level.

Lots of offers from Poland
This development deserves a comment, because last year around this time it was very cold with even Siberian temperatures; it has actually been warm in recent weeks. That can give a distorted picture. Nevertheless, it is clearly noticeable that the European milk supply is increasing.

Large volumes are offered to Germany from Eastern Europe (particularly Poland). This also dampens sentiment elsewhere in Europe. The willingness to purchase milk is not high; Dairies with their own supplies therefore hardly buy any more.

The DCA spot quotation for raw milk drops by €3 to €31,50 per 100 kilos. Due to various disruptions at the dairy processors, this decline could be distorted, but this can only be said with certainty next week. Prices for raw milk are also falling in Germany.

Room prices further reduced
The DCA room quotation is also declining (-€150 to €4.350 per tonne). Butter producers find it risky to stockpile now that prices are falling. Inventories are already ample, while demand on the world market is tame. Recent price drops have increased demand for European butter, but importers are still focused on New Zealand. The price difference between European and New Zealand butter has now been leveled out. On paper that is of course positive.

The European butter price may pick up again, but then exports outside the European Union must improve significantly. Demand from the fresh segment can also turn the tide, but that will have to wait until spring arrives. For now, the main concern is uncertainty.

The high milk supply also puts pressure on skimmed milk powder. The upward trend is over, although prices do not drop immediately. The DCA quotation for skimmed milk concentrate does this and drops by €100 to €1.400 per tonne, mainly as a result of a large supply. Compared to the current skimmed milk powder prices, milk concentrate charges interestingly, which means that it is expected that (unlike raw milk) there will be enough buyers taking in volume.

Good demand for cheese
In all this price commotion at the cheese market, we are out of harm's way. The German cheese price (Gouda 45) was again unchanged this week at €2.950 to €3.100 per tonne. Manufacturers are aiming for higher prices because demand is good. This has not yet been achieved, although the undertone on the market is positive. Also because the price for Cheddar on the Global Dairy Trade rose 6% this week to $3.888 per tonne.

However, based on current dairy prices, higher milk prices are not likely. The payout prizes towards dairy farmers are even a bit on the high side. 

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