Whey powder price is quietly in free fall

Until recently, the dairy market was firmly in the saddle. From milk powder to butter to cheese. In recent weeks, the foundation under the major manufacturers has started to crumble. However, whey powder prices have been falling for much longer. Moreover, the decline is rapid. The DCA quotation for whey powder (feed) has already lost €500 since the beginning of April and has been below the limit of €1.000 per tonne since this week. Also food gradeproduct decreased significantly in value, but less quickly.

Combination of factors
Where does the turnaround come from? It seems like a combination of factors. Export demand outside Europe is much weaker this year. In the first four months of this year, exports fell by more than 10% to 250.000 tons, according to Eurostat figures. China in particular, which is usually prepared to pay a high price, imports significantly less. Volumes to the Asian country almost halved, but China is still the most important sales market with more than 50.000 tons. This drop in demand is mainly reflected in the books of Dutch exporters, as they traditionally export large volumes there. The lockdown and growing Chinese milk production are slowing down Chinese demand. This can be partly offset by higher sales in other Asian countries, such as South Korea.

The shrinking animal numbers in Northwestern Europe is one reason that there is less space for placing whey powder feed. In addition, whey powder prices rose far too high in the first quarter, causing animal feed companies to look for substitutes. Another factor is the high energy prices in the form of gas. Processors with drying capacity currently prefer milk powder production. Liquid whey is therefore dirt cheap and is pushed onto the market at dump prices. The cost price for whey powder is therefore also lower, which in theory justifies the lower selling price. This last argument seems a bit far-fetched.

Whey powder is a harbinger of rest?
By the way, a whey powder price close to €1.000 per tonne is not bad from a historical perspective. In the past, quotes rarely exceeded this limit. This leads to the conclusion that whey powder has 'lived beyond its means' in recent months and is now being called into question again. The movement in whey powder may be a harbinger of a general price correction on the dairy market.

The market is currently in a negative spiral, just as many commodity prices are experiencing heavy losses. However, the weaker dairy market can also be reconciled with the holiday period, which is always weaker. According to market insiders, the moment of truth will arrive after the summer holidays and we will probably know more. In the meantime, the whey powder price is - historically speaking - reasonably back on the ground, but this does not yet apply to butter, cheese and milk powder.