Spotmarkt has wings, but for how long?

DCA's cream quotation was slightly more than €39 above ZuivelNl's butter quotation in week 2.000. This has not happened before since 2010. No data is available for the period before that. A price difference of €1.000 is already unusually large, let alone the gap that is now visible. Based on the current cream quotation of €6.595 per tonne, butter should theoretically fetch at least €5.400 per tonne. In practice, barely €4.500 is paid per tonne. In a historical context, not even bad price levels, but completely out of step with the high cream prices.

Butter producers who have to secure their cream supply on the spot market are therefore left with their fingers in the door. They choose to produce less and first deliver existing butter stocks. There are reportedly enough of them in European freezers and cold stores, although no one knows exactly how many.

French supply extremely low
Despite the drop in demand from butter producers, cream prices have risen rapidly in recent weeks. This is partly due to the seasonal decline in milk supplies in Europe, which is now in decline or moving towards decline in many countries. In addition, the supply in price-setting countries such as France is below the level of other years. The French supply is even almost 10% below the long-term average. The downward trend has been going on for years due to dairy farmers retiring and is reinforced by the summer dip in August. France is usually a supplier of cream, but at the moment producers there are buyers. Other Southern European countries such as Greece and Italy also continue to purchase relatively large volumes after the tourist season, insiders indicate. The demand comes mainly from the fresh segment. Although the price increases on the cream market can partly be explained, the extent to which they occur is surprising.  

Skimmed milk concentrate also benefits from the scarce supply and good demand from the fresh segment. Prices have recently risen to just €2.500 per tonne. This means that concentrate even sells above skimmed milk powder prices, which does not happen often. This is also unsustainable, just like the tense situation on the cream market.

More milk on the way
The milk supply will increase again seasonally in the coming weeks. In France, historically, from this week, in the Netherlands and Germany a few weeks later. This will reduce scarcity and spot prices will undoubtedly fall. Some insiders even warn of a price crash. This was even expected, but for the time being the high cream and skimmed milk concentrate prices are still holding up.