The ample milk supply has caused a lot of price pressure on the dairy market in recent months. The market still feels weak during the holiday period, but there are clear signs that the milk supply will tighten considerably in the coming months. This can give the dairy market the desired incentive.
The ample milk supply has caused a lot of price pressure on the dairy market in recent months. The market still feels weak during the holiday period, but there are clear signs that the milk supply will tighten considerably in the coming months. This can give the dairy market the desired incentive.
During the peak of milk supply in May, there was little processing capacity available at dairy processors in Northwest Europe. In the meantime, it is already August and processors indicate that the milk supply is much more manageable. This is also evident from the spot milk prices, which have risen to €38,50 per 100 kilos and are even higher in Germany. This means that processors no longer have to bring money when they sell volume on spot. The opposite principle also applies, of course, which means that spot milk is no longer available for next to nothing.
On autonomous power
Other liquid dairy products are also increasing in value. Despite the weak butter and milk powder market, the prices of cream and skimmed milk concentrate are making organic gains. This development also confirms that the milk supply is no longer oppressively large in Northwestern Europe. Historically, liquid dairy prices continue to increase towards the autumn. This means that it is quite possible that spot milk prices will exceed payment prices. In addition, cream could well price itself out of the market compared to the butter market, which is unable to make a fist due to ample stocks. Of course, it remains to be seen whether opportunism will actually arise in the liquid market, but this certainly cannot be ruled out. Especially when we look at the milk supply from the price-setting countries in Europe.
German milk supply is declining rapidly
In Germany, milk supply in the first half of this year was well ahead of last year, but in recent weeks production suddenly fell far below this level, according to figures from AMI. Production growth is also clearly weakening in the Netherlands and Poland. As in Germany, this can be attributed to the sharp drop in milk prices. The Irish and French are even milking below last year's level, just like Italy. Due to the extreme heat in Southern Europe, the Italian milk supply could also suffer a serious blow. Belgium is still milking vigorously, but here too the drop in the milk price will sooner or later slow down production growth.
New Zealand milks less
Viewed on a global scale, the milk supply is also tightening. Although New Zealand is coming into season, production there is also declining year on year. At 230.000 tons, supply in June was 1,7% below last year's level. In May there was still a plus of almost 10% visible. As far as production in the coming months is concerned, much will depend on the weather conditions, but the kiwis will enter the new season with an apparently manageable supply.
In the United States, milk supply was sky-high until recently, but production growth is slowing down. In June growth was only 0,2%. A sharp drop in milk prices in combination with drought in the Midwest could further tighten milk supplies. A seasonal decline will occur in any case.
What does the question do?
All in all, there are clear signals that the milk supply will relieve the dairy market in the coming months. Whether this also leads to higher prices remains to be seen. Chinese demand is weak and is likely to remain so in the coming months, due to the ailing economy, which is even leading to deflation. Purchasing power is also under pressure in Europe and the United States. However, food inflation is now easing, partly because dairy is priced cheaper in supermarkets. In short: the demand side remains uncertain, but a tighter milk supply will allow the dairy market to relax in the second half of this year.