Inside Milk
Bargain price of milk is far above raw material value
The cream price continues to improve, while the quotations of spot milk are also steadily climbing. This is somewhat striking, because the raw material value of the milk fell below €30 per 100 kilos in August. How is this possible?
Read this article?
Become a subscriber and get instant access
Choose the subscription that suits you
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 €0,70 to €29,70 per 100 kilos in August (at 4% fat, ex-farm). The decline is mainly the result of the butter price, which dropped considerably during the summer months.
Liquid dairy continues to rise
Spot prices for liquid dairy are now steadily rising. The DCA quotation for southern Germany increases this week by €0,50 to €38 per 100 kilos. The price is also rising in the north of Germany, while the quotation for the Netherlands also increased by €0,50 to €35,50 per 100 kilos. Cream and concentrate prices are also continuing to rise. The DCA cream price increases by €200 to €4.600 per tonne. The skimmed milk concentrate quotation will increase by €60 to €2.040 per tonne.
The prices of solid dairy products are generally stable or are rising much less rapidly than before. The price of butter is stable at around €3.400 per tonne and cannot match the quotation for cream. The price of skimmed milk powder is approaching €2.100 per tonne. Cheese prices are recovering somewhat after the dip of recent weeks.
The reason why liquid dairy runs up has 2 causes. First of all, the milk supply trough is coming; In Europe, production is traditionally the lowest during the months of September and October. What of course plays a role is that in the Netherlands and Germany less is milked. Demand from the fresh segment is also surprisingly good. In principle, the relatively cool late summer does not provide any reason for this. Dairy companies with delivery obligations to customers are therefore prepared to pay a lot for liquid dairy.
Correction is lurking
If the solid dairy market continues to move stably, it is almost inevitable that liquid dairy prices will be written down sooner or later. It is difficult to guess when this moment will arrive. Some market participants had already expected this moment, although others think it is still a long time coming. In any case, the higher spot milk and cream prices are no reason for higher prices payout prizes expected for dairy farmers.