Low spot price is a bad omen for milk money

The dairy market was already under considerable pressure in the last months of 2022, but the start of 2023 has even been poor. Cheese and butter prices are in a downward slide, with prices for Gouda and Edam already at the long-term average. The latest reports are that Gouda and Edam are already below €3.000 per tonne. The bottom of the milk powder market is also falling, mainly due to the rapidly increasing corona infections in China, where the lockdown has been released under pressure from the population. In the short term, this significantly limits the sales opportunities for milk powder in the Asian country.

Spot milk price has fallen far
The rapidly depreciated dairy commodities also put pressure on liquid prices on the spot market. Cream and skimmed milk concentrate cannot recover from the traditional Christmas dip in the new year. The same applies to DCA's spot milk prices. The quotation for Dutch milk has dropped to only €33 per 100 kilos. The lowest level in more than two years. In addition to the poor sales opportunities for dairy products, the significantly increased milk supply in many European countries is a heavy burden for the market. Growth rate from 2% to 6% major producing countries The Netherlands, Germany, Ireland and France are causing the white milk engine to falter. 

It is little consolation that January is always a weak month in terms of sales, which may cause the dairy market to exaggerate negatively. It is true that the losses suffered will not be made up for immediately later this year. The raw material value of milk has taken a serious hit. It varies per valorization stream, but €40 is now closer to €50. This means that the payout prices are very tense. The downward trajectory appears to be the start of a series of significant cuts in the coming months.

Decline becomes heavy
In Belgium they are a bit more progressive than in the Netherlands. Members of dairy cooperative Milcobel received barely €50 per 100 kilos in January. Dutch milk processors walk on eggshells when implementing downward changes. Many factories are looking for new members or suppliers to secure their raw material position in the future. This is out of fear of high numbers of quitters in the coming years. Taking the lead in lowering the milk price is of course not useful. For dairy farmers in our country, this may smooth off the sharp edges of the milk price decline, although it will be significant in any case. The extremely low spot milk price paints an overly pessimistic picture, but a bottom of €50 will probably not hold.