Falling cheese price hurts producers

Almost the entire dairy market continues to decline, but the rate of price decline is not the same everywhere. Milk powders were the most competitive this week, with the exception of whole milk powder. The price of these fell relatively sharply this week.

The relatively large price drop for whole milk powder appears to have been at least partly caused by heavy sales discounts by Irish producers. Due to an extra long growing season, Irish milk production has continued longer than normal, resulting in an extra large supply of product.

Large price spread
The result is, among other things, that whole milk powder is offered for prices below €4.000. On the other hand, German producers are still asking €4.500. So there is a wide spread in prices, but with extra supply at the bottom. 
Skimmed milk powder has now fallen so much in price (not this week) that the product can be offered below the average world market price. This does not yet result in many additional exports, because many buyers choose to wait for further price drops.
 

European milk supply high
These decreases are possible because milk production, especially in Northwestern Europe, is now between 5 and 10% higher than last year. There is plenty of supply, with continued price pressure. This week, the consequences of this are mainly evident on the cheese market, although there is sometimes still a wide spread in sales prices. Cheddar and mozzarella scored slightly higher on average, it appears data from DCA Markets.

Shocking tender
There was a very significant price drop for Gouda and Edam foil cheese. Especially considering that cheese has so far remained relatively out of the picture. An important influence on this sharp price drop came from a purchasing tender from a cheese trader/processor, which was awarded at a price of €4.125 per tonne. The traded lot was relatively limited in size (less than 500 tons), but the market was shocked by the fact that a number of parties were willing to register so cheaply.

Some market parties believe that the sharp drop in the price of foil cheese is an overreaction, while other voices want milk powder prices to fall even further after this. Who is right will become clear in the coming weeks.
In the meantime, the price of butter fell again, but the price of cream received a further boost. The suspicion is that the latter is happening due to slightly more demand for Christmas production. The price for skimmed milk concentrate continued to decline.
 

Raw milk prices, meanwhile, remained relatively stable this week, but at a level a few cents below the level of the price paid to farmers. The raw material value of dairy products (cheese, butter powders) is now a few cents per kilo lower.

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This does not bode well for the milk price, but it is expected that dairy farmers will only feel the consequences in the new year.