Processors are struggling with high milk prices

Milk prices usually show herd behavior, but that is not the case at the moment. In the Netherlands, DOC Kaas, A-ware and Vreugdenhil recently implemented a (slight) increase, but FrieslandCampina and Lactalis Leerdammer, among others, did not agree. Cono had stopped increasing the milk price a little earlier.  

Spot milk price severely depreciated
Determining the milk price is more precision work than ever. Looking at the dairy market, reductions are appropriate. After all, the raw material value of milk is approaching €50 per 100 kilos, or, according to some, has even fallen through that. The spot milk price has also fallen from around sixty to €55,50. Nevertheless, Dutch processors are reluctant to be trendsetters in lowering the payment price. Now that the battle for additional suppliers is in full swing, they are reluctant to disappoint their suppliers or members.

In the background, processors are also looking at the average milk price for 2022 mutual differences are often limited, so a reduction or increase can make all the difference. The position of dairy farmers in the chain has therefore improved without noticing. Yet reductions cannot be delayed for much longer, according to the voices in the corridors. The divergent directions of milk prices also expose the individual contracts of processors. For example, DOC Kaas based the price increase for November on favorable German retail contracts, as parent company DMK justified. 

Belgian milk prices are declining
In Belgium, the battle for dairy farmers is also underway, fueled by entrants from the Netherlands. However, this does not prevent Belgian processors from making reductions. Milcobel already indicated last month that dark clouds were hanging over the dairy market, thus preparing minds for a reduction. That reduction has now happened. LDA reduced the October milk price by €2 last week. Milcobel is taking it a little easier with a minus of €1,50 for November. The dairy cooperative indicates that the reduction is a logical consequence of the increased costs in the chain and even speaks of 'hyperinflation'. They are exaggerating a bit. Because although the cost of living has increased significantly, hyperinflation is still far from an issue in the Western world.

In the meantime, the dairy market is 'bottoming out'. The upward correction of milk powder prices Global Dairy Trade confirms this. Cheese prices are still under heavy pressure in mid-November, so there is no definitive bottom yet. Still, the more stable powder prices could be a harbinger for cheese, market insiders think, although this remains to be seen. More stable dairy prices would suit many processors, as the gap between the commodity value of milk and payment prices has become quite large in recent months.