Analysis DCA dairy quotes
Christmas question is a cloth for bleeding on the dairy market
A bottom for the rapidly falling dairy prices is still not in sight, despite the higher prices on the Global Dairy Trade earlier this week. Liquid dairy prices have bounced back a bit due to Christmas demand, but that seems to be nothing more than a cloth for the bleeding.
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The dairy market has been gripped by inflation fears for at least ten weeks. This means that a drop in demand is likely, as well as causing a shift from branded dairy to private label. In the background, the milk supply is increasing surprisingly quickly. This is especially the case in the Netherlands, where production in October was almost 5% higher than last year. But dairy farmers in other exporting countries such as Poland, Ireland and Germany have also stepped on the accelerator. Especially now that milk supply is rising again seasonally, the year-on-year increases are starting to slow down.
Lack of demand for 2023
The increase on the Global Dairy Trade has not been able to put a floor under European prices, as market insiders seemed to assume for a while. This is partly due to the appreciation of the euro against the dollar, which has further deteriorated Europe's competitive position on the world market. The internal European market appears to be paralyzed by a total lack of demand for the first and second quarters of 2023. Buyers can sit back knowing that milk production is growing and stocks are increasing. The thinking goes that the sales pressure will then probably increase.
Prompt question is present
For prompt deliveries there is still a question. This is related to Christmas production, which is historically common from mid-November. The milk fat in particular benefits from this. For example, the DCA butter quotation rose again this week to just under €6.000 per tonne, and in the same breath it should be noted that prices for the new year are considerably lower. The cream price also increased slightly.
Milk price at odds
Meanwhile, cheese prices continue to slide downward. Milk powder prices have also started to fall again this week. The quotation for skimmed milk powder passed the €3.000 per tonne mark, the lowest level in more than a year. Whey powder prices are also weak. Meanwhile, milk processors are becoming... increasingly restless, because the high payout prices are starting to become more and more of a pinch. The Belgian processors have already put on the brakes. Dutch processors will probably follow suit soon. The only question is who will cross the line first.