Falling commodity market gnaws at milk price

The effect of all these movements on the dairy industry and on milk prices is usually only felt after a delay of a few months. It also varies per company. For example, Arla, which sells a large part of its milk in Northwest European retail, was able to increase its milk price for November. There are good contracts with large German supermarkets, among others.                        

Price difference in butter market slightly smaller
At the same time, it is visible that pressure on, for example, the price of butter was building up. It had been relatively high and stable for months. It has long been said on the butter market that this could hardly continue. Also because of the thousands of euros lower butter price in, for example, New Zealand and elsewhere. Yet this week's price drop still came as something of a surprise. Last week it was mentioned that a cheap lot of €6.100 per tonne was offered here and there. This week, almost the entire market was captivated by the low prices.

For nearby deliveries, price drops are still limited, but most trade now concerns deliveries in the first quarter of 2023. For that period, prices are quoted between €5.950 and €6.100 per tonne. That is about 15% lower than what was common just a week or two ago.

Retail contracts still quite high
The difference with the latest German retail contracts is reportedly even greater. These contracts have been concluded for prices between €7.400 and €7.500 per ton, but for butter in small packages. So that can explain part of the price difference, yet it is special that prices vary so much.

The effect of the lower milk fat price was also visible on the powder market. There, the price of whole milk powder now fell sharply. Understandable, because whole milk powder contains a lot of fat.
The price of skimmed milk powder stabilized somewhat this week and there was even a slight price recovery for whey powders. According to some traders, this is not surprising at all, because whey powder is the cheapest source of milk protein available on the market.

Cheese prices continue to fall this week, but the rate of decline is slower than last week. It's hard to say whether this is just a snapshot or not, but the cheese market is and remains quite robust. The product is still running quite well. Producers do not have to peddle the cheese and there are relatively few stocks, although of course there is always a slightly older batch for sale.

It does not mean that there are no threats to the high cheese price. There are. The main one is the relatively high milk production. Production as a whole is decreasing according to a seasonal pattern, but there is a few percent more milk than last year, throughout Northwest Europe.

Concentrate can be powdered again
The relatively high milk supply also ensures a rapid availability of skimmed milk concentrate. The price of this has also fallen by hundreds of euros per ton in recent weeks. According to some, far enough to make milk powder from it again. That was not possible for a long time because the price difference was too low. With a gap of about €500 per ton, powdering can be considered again.

Whether this is possible depends on the energy contract of the pulverizer. One can manage with a margin of €300 per ton, but there are also manufacturers who have €1.200 per ton in energy costs. They better let the tower rest for a while.