Analysis Milk powder
Milk powder market struggles with larger stocks
The milk powder market has been struggling for some time to choose a direction. Price increases are sometimes reversed the same week. The same goes the other way around, the market bounces up and down. Still, a fall in prices seems more likely than the chance that the market will recover.
Read this article?
Become a subscriber and get instant access
Choose the subscription that suits you
The DCA quotation for skimmed milk powder even dipped below the level of €3.500 per tonne at the beginning of August. This dip was short-lived, but it did not convince the market afterwards. Buyers and sellers are exploring the market. This leads to volatile prices in a limited bandwidth between €3.500 and €3.700 per tonne.
Weak undertone
The undertone in the market feels weak, as almost all dairy products are at the moment. In general, the extremely high dairy prices seem to be a thing of the past. Purchasing power in many European countries is under heavy pressure, which is of course unfavorable for sales figures on the continent. Especially because milk powder is an ingredient for luxury goods such as chocolate.
Export demand has also suffered this year. Between January and July, European exports were 20% lower to 392.000 tonnes. Sales in China in particular are being missed. China's appetite for dairy has been satisfied by more domestic production, continued lockdowns and lower birth rates. After July, the euro has weakened considerably, but according to insiders this has little effect on sales volumes. Third countries are increasingly finding it difficult to pay the high prices, partly because the extremely high oil prices have disappeared. This curbs the purchasing power of major importers such as Algeria and Nigeria.
Friend and foe agree that the dairy market will encounter more headwinds in the coming months. This makes trading houses reluctant to buy up stocks. Floor inventories at producers are increasing, according to insiders. Older powder stocks are increasingly being offered, this is a signal that confirms the larger stocks.
European product the most expensive
On the Global Dairy Trade, the price of skimmed milk powder fell through the $4 per tonne mark yesterday (October 3.500). This is the lowest level in a year. American products are also included. Given the almost equal exchange rate (parity) between the euro and the dollar and the weak undertone in the market, European prices also appear to be falling through this limit. Irish and Polish product is already being 'pressed' into the market at these levels. Powder of Dutch and German origin costs about €100 per tonne more, but is forced to move downwards.