War indirectly also affects the milk powder market

The dairy market is experiencing the longest price rally in recent history. That is no longer news. The question is whether the increases will stop or continue stoically. This is causing headaches in the market. Last week the price rally seemed to have come to an end, and whey powder prices, among other things, took a step back.

Surprising GDT
The milk powder market may now take a surprising turn. During this week's Global Dairy Trade auction, milk powder was surprisingly significantly higher. Skimmed milk powder rose 4,7% to $4,481 per tonne and whole milk powder rose 5,7% to $4,757 per tonne. Existing records were shattered. This confirms that there is still a lot of demand worldwide, despite the high milk powder prices being a stumbling block for importers.

Prices for milk powder are also continuing to rise in the United States. Whether the European market will respond will remain to be seen in the coming days. Traders and producers still describe stocks as extremely tight and that provides a lot of support.

Rapidly rising oil price
The war between Russia and Ukraine does not have a direct impact on the milk powder market. No pallets have been exported to Russia since 2014 and Ukraine plays an isolated role on the dairy market. However, the war does have an indirect impact. The oil price is through the roof and has passed the $100 per barrel mark. Many oil-producing countries – such as Algeria, Nigeria, and Saudi Arabia – are major buyers of European milk powder.

History shows that milk powder prices move with the oil price. As the oil price rises, the purchasing power of these countries increases and high milk powder prices may become less of a stumbling block. Moreover, the war can also provide an incentive to increase food reserves.