Dairy market struggles with opposing signals

Prices were mostly stable this week. The cheese market, which has risen relentlessly in recent weeks, showed some hesitation this week. Ultimately, this resulted in a slight plus across the board. A key factor in this week's hesitation was that many buyers and sellers alike were waiting for the outcome of new retail contract negotiations.

German retail pays more
German retail has now concluded new dairy contracts for the coming months and the first signs are that retail is going to pay considerably more. Further details on this will be released next week.

Talks about new contracts between the major cheese makers and their customers are now focusing on the first quarter of 2023. Most of the production has already been committed for the intervening period.

The picture is somewhat less clear for the powder and butter markets. Milk powder prices were clearly under pressure in recent weeks. This is partly due to the holiday season, with weak internal sales in the EU and lower prices on the world market.

Almost balance skimmed milk powder
For skimmed milk powder, almost an equilibrium seems to have been reached at a price level of around €3.500 per tonne. That certainly applies to the Northwest European prices and those at Fonterra's GDT auction. There are still deviations. Arla, for example, sold powder at this week's GDT auction for the equivalent of €3.340 per tonne and German suppliers are still holding on to a price level of around €4.000 per tonne. It is therefore not surprising that the DCA quotation for skimmed milk powder will no longer fall this week.

The market for whole milk powder is more difficult. The DCA quotation for this is stable at €4.600 per tonne, while the GDT quotation amounted to around €3.360 per tonne. That is about €1.200 per tonne lower, and also lower than the quotation for skimmed milk powder. So there is a big gap to bridge here. Full powder yielded little at the GDT because China failed (and it's not available yet). European full powder is above the world market in terms of price, but has the advantage that it is available

DCA's butter quotation rose slightly this week, as did the quotation for cream. However, the butter market is being torn apart by various signals and also suffers from logistical problems. Butter stocks are still small and especially in France there is a big shortage. This could be partly supplemented with cheaper Polish material, but the transport capacity is lacking, it is reported.
 

Logistics determine differences in the butter market
With a price of almost €7.000 per tonne, butter here is still about €1.900 per tonne more expensive than in New Zealand. But parties are hesitant about whether it is wise to have a large volume come from that country. When it arrives in October, much of the price difference may have evaporated again. 

This assumes that the butter price here will fall in the coming months, but no one is yet clear about that. Not only was butter very cheap on the GDT, but also butter oil, a further thickened form of milk fat for industrial use. It was sold for the equivalent of €4.900 per tonne, which is much cheaper than the price of butter oil here: over €8.000 per tonne.

Southern Europe attracts
Raw milk, meanwhile, clearly increased in price this week, because there was extra demand from Southern Europe. Partly due to a tight supply, in the south of Germany, between €60 and €63 per 100 kilos was paid and in Greece, by end consumers, up to €75. This is partly due to the tourist season. Strangely enough, skimmed milk concentrate, and as the only product, fell slightly in price.