Raw material value of milk down again

The raw material value based on butter/skimmed milk powder is calculated every month by the German Food Economic Institute (IFE). They report a decrease from €0,60 to €30,40 per 100 kilos in July (at 4% fat, ex-farm). This is the lowest level since April 2018.

Butter price down
The falling butter price is to blame for the lower raw material value. Since the beginning of 2019, the German butter quotation has lost almost €1.000 to €3.550 per tonne (in week 32). The price for skimmed milk powder has increased significantly during this period. This somewhat compensates for the lower rating of the milk fat. Similar price changes are visible in the Netherlands and other European countries.

The raw material value showed the second decline in a row in July. Although the payment prices towards dairy farmers quite stable move, a (small) decline is likely if the raw material value continues to decline. Milk prices generally react with some delay to movements on the dairy market.

Tight payout prizes 
It is learned from the market that payout prizes are tightly priced compared to the raw material value. This means that there is little room to absorb a further decline. Currently, the butter price seems to have found a bottom, although it still feels fragile.