Dairy market takes a beating in the liquid segment

The prices achieved this week result in a raw material value of somewhere between 40 cents and 45 cents per kilo, and that is bad for the payment prices that dairy farmers receive. These weeks are not representative of the rest of the year, because two negative developments come together: a sharply falling milk price after a period with very high prices and an early Christmas dip.

New balance needed
Now the latter is something that has actually not happened in the previous two (corona) years, so it is already hitting home. And then the dairy market as a whole is looking for a new balance. Many market parties are therefore wondering whether the current price falls are not going too fast and whether a correction will be necessary in the near future.

This will not occur in the coming days. Buyers are sitting back, the Christmas shopping is done and many people have time off. More declines are expected first.

Relatively speaking, prices for raw milk fell the most this week, more in Germany than in the Netherlands. The most commotion in the market probably came from the cream. Its price has shot down like a rocket in just a few weeks and in the past week it even fell below the price of butter for a while, which is also still falling. The cream price has now recovered somewhat.

Skimmed milk concentrate is also still low priced, but the market for this appears to be stabilizing, partly because it pays well to convert this product into skimmed milk powder, the price of which is now above €2.800 per tonne. Concentrate is almost €1.000 cheaper, depending on the origin. There is a clear division in the market between German and French concentrate, with the latter being the cheapest.

The low prices on the liquid dairy market also mean that various dairy companies decide not to offer the product on the spot market and to process it in-house. Processing milk costing 60 cents into concentrate costing €1,80 per kilo is also not attractive.

In the meantime, companies must spread their risks. Pushing all the milk into the cheese container doesn't help either. Cheese prices are still falling considerably, although some market parties believe that the bottom has now approximately been reached.

It is a difficult time to verify this, because the market is not really representative of the rest of the year at the moment. Export remains necessary to relieve the market and that works best with milk powder.