Analysis Milk
Milk remains scarce during spring peak
The dairy market has been dominated by shortages for months, leading to historically high prices. Even now that the sector in Northwest Europe is working towards the spring peak, milk production remains low. This is very likely to put a strong floor under prices.
Read this article?
Become a subscriber and get instant access
Choose the subscription that suits you
Shrinkage of livestock. Stopping dairy farmers. Expensive power feed. High fertilizer prices. Just a few reasons that put a brake on production. In the Netherlands, but also in neighboring countries such as Germany, Denmark and France. And recently Ireland has also been included in the list of European countries where milk production is lagging considerably behind other years. With the exception of Italy, supply to factories is shrinking in all market-defining countries.
New reality
Low production is expected to be the new reality for the time being. A new reality is thus dawning on the dairy market. Although in recent decades there have also been periods of scarcity, the market was more often dominated by surpluses. European retail in particular still has to get used to the record high prices for cheese, butter and white dairy. On the world market, the high prices also hurt importers.
Meanwhile, the grazing season has started. As a result, production rises to a peak in May and then weakens again as temperatures turn into summer. There is currently no upward trend. In fact, in March the daily production amounted to 37.061 tons of milk, compared to 38.051 tons in February. The daily volume produced in January was also higher than in March. In addition, the fat percentage in the milk is considerably below last year's level. In Germany we also see milk production moving sideways for the time being.
Less butter, cheese and milk powder
Of course, less raw material also means less end product, because dairies cannot 'cut two backs out of a pig' either. This is mainly reflected in the butter and cheese production in the Netherlands, which was 2% to 5% below the level of last year in January and February. Throughout Europe, butter production even shows a 10% contraction, while the production of skimmed milk powder shows a decline of almost 15%.
Dairy production has some catching up to do. Contrary to previous years, the increase in the seasonal milk supply is therefore welcomed, but it is not expected to solve the shortages. All in all, there is a solid foundation under the high prices, although the market is now somewhat hesitant. And due to the high costs, European dairy farmers are reluctant to increase production as much as possible.