Cream price explosion marks a dairy shortage

For this week the DCA listing at €6370 per tonne, which is more than €600 per tonne higher than the previous week. It is a price level that has not been experienced in years. However, it is still a long way from the price in autumn 2017, when €7850 per tonne was registered.

What added extra tension to the market was the increasing price difference with butter. While in more or less normal times the price difference between cream and butter is around €500 per tonne, this has already risen to more than €1.000 per tonne in recent months. Last week the gap was €1400 and this week it was even €2.000 per tonne. This happened despite persistent claims that the tide (lower butter prices) would turn the ship (rising cream prices). Not. The consequence of the big difference is that there is hardly any fresh butter on the open market. Those who have to deliver, but do not do so and choose to sell cream, can even accept the fine and have money left over, it is said. In practice, this will not happen quickly, because doing business remains a matter of trust. However, it shows the tension. 

Low and further declining milk supply
At the root of this lies the low and still declining milk supply. The high raw material prices are achieved with small volumes of product traded, but they do set the market.

Normally there would often still be milk available in France around this time, but the situation there is even worse than in Northwestern Europe. In France, more than €0,50 is paid for a kilo of milk. There is only extra dairy available from Eastern Europe, but not everyone wants to buy that product.

Shortages persist
It should become clear in the coming weeks whether the low milk supply and shortages on the dairy market will continue for much longer. Initially it was expected that extra milk would become available again by mid-October. That hope seems to be fading more and more.

Dislocation
In another sign of the disruption in the dairy market, skimmed milk powder is currently cheaper than skimmed milk concentrate. If skimmed milk powder were currently made from concentrate, the end product would be around €300 per tonne more expensive than the quotation for skimmed milk powder indicates this week.

The cheese market is also increasing. Gouda foil cheese is worth well above €3,60 per kilo. Also a price that has not been quoted for a long time. Producers anticipate even higher prices in the near future and put as much milk as possible in the cheese bin. As a result, there should also be a lot of whey available. Normally the prices of this product fall, either due to a large supply or a lack of drying capacity. There is no sign of either of them. According to traders, there is also a whey (powder) shortage.

This should ultimately be good news for dairy farmers. Various traders predict that milk prices will continue to rise in the near future. In Northern Germany, the value is currently already around €0,42 per kilo, it is reported.