Dairy market in holiday dip, quotations fall

The sunny weather at the beginning of this week with higher temperatures has also put the dairy market in Northwestern Europe to sleep a bit. This was partly due to holidays in Germany, Poland and Italy. In Poland and Germany today (Thursday, June 3) was Corpus Christi, an official day off. Italy celebrated Republic Day a day earlier on Wednesday, June 2. Due to these holidays, the action on the dairy market was largely over by mid-week and there was little tension. Rather relaxation.

Although the traditional peak in milk supply has now passed, milk production is declining just as quickly as the trade is used to. Dairy farmers are maintaining production for a little longer after the relatively cool spring, probably also encouraged by the relatively higher milk prices. As a result, the supply is now somewhat higher than what the market had expected, although the capacity of the milk factories can handle the supply well. In a somewhat chaotic and tepid trading week like this, partly due to the holidays, this results in predominantly declining DCA quotations.

Need for additional purchases low
The DCA quotation for Dutch spot milk remains stable at €37,50 per 100 kilos delivered at 4,4% fat. The market for spot milk of Dutch origin is particularly thin, because the milk supply is well absorbed by the factories. The need for additional purchases is therefore low, resulting in a stable listing. In Germany, the supply of milk is greater, which is directly translated into lower quotations due to the current more limited market demand. Northern Germany costs an average of €34,50 per 100 kilos delivered at 4% fat, southern Germany records €36 per 100 kilos. In both cases that is €1 less than last week.
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It became clear in various segments that trade in important dairy countries took a back seat in the middle of this week during the holidays. For example, in the fat segment, butter appears to have reached the top for the time being at €4.100 ex factory, the DCA quotation from last week. The question is tame. The stocks are not excessive, but to promote trade, suppliers have dropped prices. Looking at this week as a whole, the DCA quotation for butter is €4.065 per tonne, €35 lower than last week. 

Room supply larger than expected
Cream is affected by the higher than expected milk supply during this period. Because butter sales are not running smoothly, cream is mainly dependent on demand from the fresh market. This is continuing well, but not enough to properly absorb the supply. Because the supply of cream is larger than expected, DCA Room drops by €70 to €4.890 per tonne ex-factory.

Cheese faces the same problem. Demand for foil cheese is also unable to exceed supply, due to the unexciting week. DCA Foliekaas Edam and Gouda will therefore be depreciated this week by €40 and €35 ​​respectively to €2.980 and €3.015 per tonne ex-factory. The milk powder market is mainly stable with small steps up or down in price. Here too, the demand is not extremely high, for DCA Whole milk powder rose by €15 to €3.215 per ton ex factory. However, the DCA quotation for skimmed milk powder takes the opposite route: it drops by €10 to €2.595 per tonne ex-factory.

Foundation is strong
However, this week's weak market is not a signal for the course of the dairy market in the coming summer months, is the most common expectation in the trade. The foundation on the dairy market is strong. But due to the uncertainty surrounding the relaxation of the corona measures in the various sales markets, a lot of short-term trading is still done.

If it becomes clearer how the lockdowns will be lifted and sales to the catering industry will resume, the dairy market may receive a boost. This can provide room for more long-term agreements, thus also higher stability in place. A real decline in milk supply is expected in the coming weeks.