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Milk Trading Company in red due to high milk price
The high milk prices of recent months are good news for dairy farming, but are costing members of the Milk Trading Company (MTC) money. This confirms advisor Niek Groot Wassink. Anyone who fixed the milk price earlier this year will now see profits pass by and have to make additional contributions.
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"For the first time, we are experiencing the full effect of the MTC: a stable above-average milk price where peaks and valleys are smoothed out," the organization states. on LinkedIn.
On average, the MTC has consistently made a nice profit over the past few years. According to Groot Wassink, on average, participants had about €2,00 per 100 kilos of milk left over each year. This will not be the case this year and the year will end with a loss. According to Groot Wassink, it is not yet possible to say how great that loss will be.
Profits on feeding contracts no longer help
In the first half of the year, returns still went well. This was also because the contracts for feed raw materials that the MTC compared to the butter and milk powder contracts actually returned very well. Those contracts still do that, because favorable long-term contracts have been concluded, especially for soy. However, the profit on the feed contracts no longer makes up for the loss on the dairy contracts. Milk prices have risen so much that a significant additional contribution is now required. That can get expensive.
Only losses if the milk price is high
To manage the risks of trading via the MTC, newcomers must first follow a course and are allowed to commit up to 35% of their supply in the first year (with a minimum of 10%). For participants who participate for longer, a maximum of 50% applies until this year. From next year, up to 60% of the supply may be tied up. The risks of trading, meanwhile, are for the individual participants, as are the profits. Groot Wassink: "It cannot be the case that the group has to pay for the losses of individual participants." However, he does not see any major risks in the long term. "We only make a loss if the milk price unexpectedly becomes very good."
That is why, according to the organization, fixing milk prices via the MTC still remains a profitable business. There is currently little trading and hedging. The MTC says it is full for 2022. It is still possible to join before 2023. MTC has 325 members, the majority of which are in Belgium.