Inside Milk
Fat market trend does not bode well for milk price
The DCA quotation for cream is under severe pressure, while butter has been falling in price for weeks. A declining trend for milk fat is also noted on the cheese market in the first half of 2020. This does not bode well for the contribution of fat to the milk price of the dairy manufacturers.
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The DCA quotation of cream for week 28 has fallen by €0,10 to €4,10 per kilo ex works. In the second week of this year the price was more than one euro per kilo higher, but since then it has fallen structurally - albeit with some upturns. This largely has to do with the butter market, where there is an oversupply and the quotation has been in free fall since week 19.
Inventories are simply too large and demand, especially from retail, is too tepid. That will not change in the coming period. In fact, the holidays seem to weaken demand. After all, many consumers will be in Southern Europe or elsewhere in the coming weeks and will not buy butter, whipped cream or ice cream. There is also insufficient demand for fat products in the export areas to alleviate the European market. This is how it went on the last auction day of the Global Dairy Trade (GDT) the price of butter also fell.
Incentives in demand
There is sufficient supply across Europe, due to milk production remains relatively high. Countries such as Ireland, the United Kingdom and Poland, which produce significantly more milk than last year, are contributing to this. If supply remains at the same level, the incentives must come from the demand side. Unless it will be a very hot summer, a clear incentive for ice cream, for example, the market parties do not see this for the time being.
The cheese makers are already taking the first half of 2020 into account with fat prices under pressure. This could well leave a trace in the milk price that dairy manufacturers pay to 'their' dairy farmers for the second half of this year.
The powder market is stable and does not currently appear to be in the starting blocks for a price rally. The DCA quotation for skimmed milk concentrate has increased by €28 to €70 per tonne of dry matter for week 1.920. The range in prices is large. Concentrate is following the slightly increasing market for skimmed milk powder.
Raw milk popular in southern Germany
The spot market for raw milk is quiet. Slightly more supply than last week results in a small correction downwards. The DCA quotation for raw milk in the Netherlands drops by €0,50 and amounts to €34,00 per 100 kilos at 4,4% fat. On the German raw milk market, the sounds are somewhat variable, with a wide range of prices.
What is certain is that Italy is still a buyer for milk from southern Germany, which means that this quotation is still high compared to the Netherlands and northern Germany. The DCA quotation for raw milk in southern Germany remains stable at €39,50. Northern Germany shows a diverse picture with a wide range of prices.
Holiday mood
On the one hand, the North can benefit somewhat from the South, although the Italian market is literally too far in terms of transport costs. On the other hand, prices in East Germany are under pressure, partly due to declining demand from Poland. Ultimately, a DCA quotation for raw milk is obtained of €35,50 per 100 kilos of milk at 3,7% fat, exactly €1,00 higher than last week.
The holiday period, milk supply and the weather are important factors on the dairy market in the coming period. Demand from Italy is expected to continue for a few weeks, even though the holidays will start there soon.