Analysis Milk powder
Milk powder from EU now most competitive on world market
Milk powder prices have been under considerable pressure in recent months. European product was for a long time more expensive on the world market compared to that from New Zealand and the United States, but the roles have now been reversed. There is no guarantee that this will trigger export demand.
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The dairy market has been hit across the board in recent weeks, fueled by high inflation figures. Cheese prices are now rising the most, milk powder prices were already heavily marked down in October. The market is still ailing. The DCA quotation for skimmed milk powder has not been able to hold above the level of €3.000 per tonne.
The price spurt in the first half of this year was a result of ultra-tight supplies. In the meantime, the balance on the market has been reasonably restored. In fact, supply currently exceeds demand. Stocks in Europe are growing, insiders confirm. Producers are trying to stimulate demand with lower prices, but so far without success. The market was under persistent pressure in November. Especially in Europe. As a result, European products (expressed in dollars) are now the most competitive on the world market, although the difference with New Zealand is limited. American milk powder is almost $200 per ton more expensive.
Most competitive
This development is striking, because the American market did not peak as high earlier this year. Whether European exporters will notice a difference as a result of this change remains to be seen. Export demand has been weak all year, especially from China. In the first three quarters of this year, sales fell by 15% to 517.000 tons. Sales to China plummeted by 41% to just under 65.000 tons, making Algeria now the most important sales market. Moreover, due to the ongoing lockdowns in China, it does not look like demand will recover quickly. Even after the fierce protests in recent days, the Chinese government continues to adhere to its zero Covid policy.
The high gas price does not prevent Dutch producers from reducing milk powder production, according to figures from Statistics Netherlands. From May to September, production volumes were considerably higher than in previous years. The difference with last year is due to the higher milk supply, but that does not say everything. Production volumes are also above 2020 and 2019, while milk production was significantly higher then.