A lot of sentiment has unexpectedly crept into the dairy market. On the liquid spot market, prices for cream and skimmed milk concentrate have skyrocketed in just a few weeks, making them a far cry from powdered milk and butter. Now the question is: will the solid products follow the liquid market, or will the high liquid prices break.
While it was expected that prices on the liquid market had reached the seasonal increase in the autumn last week, a further recovery followed this week. Cream rose further to €6.600 per tonne, or even more. Skimmed milk concentrate costs €2.500 per tonne. Such prices have not been on the boards since November last year. Spot milk prices are also rising and are well away from €45 per 100 kilos.
Tightness in liquid segment
The liquid market is benefiting from the seasonal decline in milk supply, which is now almost at its lowest point. At the same time, demand from the fresh segment remains better than expected. Southern Europe in particular is on the market, while demand from this region often drops well after the tourist season. This combination creates shortages in the liquid segment. Trading volumes are therefore also lower, but the market has become considerably heated.
Skimmed milk concentrate is now even more expensive than skimmed milk powder, something that only occurs sporadically. Economical drying is no longer an option. This probably means that less product is dried, which in turn gives the powder market energy again. The milk powder market has long been characterized by high stocks, but according to insiders these are currently being 'eaten up'. The demand for powder has also improved somewhat. This is because buyers realize that they have to take action now that the market is rising. At the same time, sales are not wild. The demand for feed powder is proportionately better than food, which reduces price differences.
Big gap between cream and butter
The rapidly rising cream prices are pushing up the butter market, but the rapid rate of increase is far from being kept up. After all, the butter market is still dominated by ample frozen stocks. Cream prices are expected to crash sharply soon if sentiment on the liquid market turns around. Whether this will be next week or mid-October remains to be seen. With a historically large price gap of almost €2.000 per tonne between cream and butter, a correction cannot, in theory, take much longer. The same applies to the skewed ratio between skimmed milk concentrate and powder.
Cheese market is also on the rise
The cheese market is also moving upwards. Partly due to the overall positive market sentiment and partly due to our own strength. The stocks of Gouda and Edammer are described as tight by producers. Trading houses are less certain about this, but end users are willing to pay higher prices. Gouda's quotation rises to €3.650 per tonne, definitively eradicating the summer dip. It is difficult to estimate where the ceiling reaches in the foil cheese market.