Analysis Milk
Milk prices not yet at the top
The advance of milk prices has been rapid, but the peak does not seem to have been reached at the beginning of 2022. Judging by the high raw material value of milk, the payout prices can go one step further.
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In November, the raw material value of milk, calculated by the IfE (Institut für Ernährungswirtschaft) in Kiel, passed the limit of €50 per 100 kilos, setting a new record. In the past, €50 was always an unattainable fortress, but that is no longer the case due to the price rally on the dairy market. Taking into account the rising inflation in the eurozone, this is a favorable and necessary development for the dairy farming sector.
The raw material value of milk rose last December to €52,40 per 100 kilos. Based on current forward market prices, the IFE even calculates a raw material value for January and February above €55. Grossly speaking, this is more than €10 higher than the bottom of the range current payout prices at most processors in the Netherlands. Based on this gap, it is likely that milk prices can continue to rise in the first quarter. Further away you can still see coffee grounds.
Solid dairy market
The current raw material value of the IFE is also an unrealistic price target for milk prices. This is because the raw material value is calculated on the basis of weekly quotations, while the basis for milk prices is not based solely on day trading. The long-term contracts (semi-annual and annual contracts) are generally at a lower level. The dairy market is currently solid. Although butter prices will be under pressure in early 2022, the dairy market feels firm across the board thanks to lower milk supplies. Milk powder prices have the greatest potential for increase.