Liquid dairy is on the rise, cheese remains under heavy pressure

Few people expected the recovery in prices for raw milk and liquid semi-finished products.

No one dares to say whether this development is here to stay. According to many market players, it could just as well be a positive snapshot as the start of something more permanent. Not all signs are reassuring. The milk supply is and will remain relatively high and the supply will only continue to increase in the coming months. The peak of spring supply is not expected until around May.

Retail and Italy
The causes of the current revival can be identified and parts of it may be more structural. In general, slightly better retail demand for liquid dairy is noticeable. In addition, increasing sales to Italy also play a role. This has taken pressure off the liquid market as a whole. This translated into rising prices for cream, concentrate and raw milk.

The butter market is also slightly better on the selling side this week, mainly thanks to a relatively favorable retail contract from Aldi.

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It has agreed with a number of suppliers a price of €5,10 per kilo for butter in small packages. Compared to the daily market, that is an excellent price. There is also a lot of volume involved. However, there is the problem that the contract is reportedly only valid for one month. For the time being, however, it is lifting the market slightly.

Not good news with large flows
So much for the somewhat more positive news. Things are a bit more complicated with cheese and milk powders, and therefore larger milk volumes. There remains pressure on the market due to lagging demand and disappointing exports.

The cheese market is where it is most difficult. Prices continue to fall, especially for Gouda and Edam foil cheese. Cheddar is holding up better and the mozzarella price is also falling slightly more slowly than that of Gouda foil cheese.  

The DCA quotation indicates a price of €2825 per tonne for Gouda foil this week, but there is a fairly large price spread around that. This is due to differences in origin, quality and, increasingly, age. The average age of the foil cheese is increasing and traders or other parties often do not want to accept the purchased cheese because the product is in danger of becoming too old.

'Intervention' by cheese makers themselves
A few large cheese makers in Germany and the Netherlands have therefore decided to take emergency measures and withdraw large volumes from the regular sales market. It is a kind of intervention by the producers themselves. For these cheeses there are smelters or buyers far away from the home market.  

More exports needed
The question is whether it will be enough for the market to recover. The milk supply remains high.
That is why more exports of milk powders are needed. A few large consignments of milk powder have already been sold to North Africa, but reportedly at prices that are now only quoted in Eastern Europe. Milk powder is still €150 to €200 cheaper per tonne there than here.

The hope is therefore that China will return to the market now that the New Year's Eve festivities are over. Chinese supplies are low, according to the US Department of Agriculture, and domestic milk production is under pressure.

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The market for whey powder also remains weak. Food whey powder is listed at just above €800 per tonne. This means that margins on production are narrow.

Free whey
There is still a wide supply of whey, due to the high cheese production, but the high drying costs (from around €600 per tonne) are virtually squeezing powder producers. It is therefore not surprising that the whey can already be collected for free from some German cheese makers.