Milk market waiting for bargain hunters

No one could have imagined 4 months ago that milk would now be dumped in many places in the US and Canada. And that a voluntary milk reduction plan would be discussed in Europe. After all, the dairy market was laughing at us until recently, partly thanks to the strong comeback of skimmed milk powder and cheese. However, the corona pandemic has put a stop to things. 

The month of May will therefore be an exciting month, because in the coming weeks the milk supply will steadily increase towards the seasonal peak. In the knowledge that the supply in major dairy countries such as the Netherlands, Germany, France and Ireland is also higher than last year. There is also a milk increase across Europe, just like in the US.

Dirt cheap milk?  
Liquid dairy prices have plummeted in recent weeks. Spot milk was traded in the Netherlands this week for €26 per 100 kilos, while German origin barely pays more than €20. French milk was recently offered much cheaper. Cream and skimmed milk concentrate have also taken off. Moreover, based on the 5-year average, Dutch milk is not necessarily 'dirt cheap'.

In the coming week, the DCA quotation will hit its lowest point from a historical perspective, only to pick up again when the milk supply drops. The question is whether the historical laws also apply in times of crisis. Demand will remain weak even after the seasonal peak, as lockdowns in many European countries have been extended until the end of May. And even after that, social life will remain restricted, as Prime Minister Mark Rutte has already hinted several times. Although crisis response differs per country, this will most likely be the case in other countries as well.

Drought can become an issue
In the background, drought is becoming more and more of a theme, although the growing season is still long. However, roughage stocks on many farms are quite depleted after a number of dry summers. If there is no significant rainfall in the coming weeks, this may create a mood on the dairy market. But we are not there yet.

Also opening up the private storage scheme for butter, skimmed milk powder and cheese (intervention) by the European Commission does little to change the weak mood. The budget of €80 million is quite limited and must also be shared with other agricultural sectors. In short: there is a lack of 'bearish' factors and the dairy market will mainly rely on bargain hunters who dare to capture volumes and stockpile at cheap levels.