Milk powder price rise still lags a bit

While it was thought that the milk powder market would level off, prices continued to rise in December. A similar situation is happening on the cheese market. Tight inventories mean that buyers get the short end of the stick.

In the meantime, the DCA quotation for skimmed milk powder (food) has risen to €3.385 per tonne. This has erased the price peak from 2013. Only in 2007 did the market record higher when price levels of €4.000 briefly came into view. In the years that followed, the market fell sharply. Such a turnaround is currently not in the cards, thanks to tight supplies and significantly lower milk supplies in Northwestern Europe. The whole milk powder price shows a similar pattern and has now passed the €4.200 per tonne mark. 

Resistance to high prices
At the same time, further price increases are not automatic. Dairy exporters and commercial agents indicate that end users are reluctantly accepting the higher prices. Buyers in the Middle East and Asia in particular expressed a lot of resistance. Powder products are in the mangle. The higher prices are necessary to absorb rising energy costs and milk prices. At the end of last year, a small-scale powder producer in our country went bankrupt as a result of the high gas bill. Although this case is isolated, it does show that high energy costs have a significant impact.

Futures market hints at decline
What the milk powder market will do in 2022 remains to be seen. In the short term, the price increase appears to continue and €3.500 per tonne is a realistic price target. In the longer term, it is still a matter of looking at things like coffee grounds. The futures market prices – which usually provide some guidance – indicate a decline. The monthly contracts for 2022 on the EEX are all lower than the current physical market prices. Another indicator is that China's import needs were already quite saturated last year, as shown by the declining import figures.