Exchange a nickel to support milk price

The result of all this is that on balance the milk price is further supported by the market - with a reservation for butter. This is good news for dairy farming.

What happened with the butter was striking. After months of going down a bit, then up a bit, the price for block butter suddenly shot up this week by more than €300 per tonne. The DCA quotation was €5.350 per tonne. That is still not the price that fresh butter should fetch based on the cream quotation - an additional €600 is required - but it is still a significant adjustment.  

The big question now is where this sudden price increase comes from. Many parties on the market are groping around. The cause seems to lie in the futures market, which suddenly saw strong upward movements this week. In short: the picture that was also seen shortly before with skimmed milk powder when the price suddenly rose sharply there too. While before that moment there was suddenly extra pressure to push the price of cheese down, which also did not work out well.

Keeper?
The interesting question is whether the much higher butter price is here to stay, or whether it turns out to be a bubble. The story was always that there were still many old stocks. Now it remains to be seen whether that is also the case. If so, the price of butter will drop again quickly. If not, a further butter price increase is possible and producers will again offer fresh butter on the open market, something they have not done for a long time.
The price of cream barely rose this week. This is in contrast to what happened with skimmed milk concentrate. According to the DCA quotation, its price increased by €110 per tonne. This was mainly caused by good fresh demand.
 

The raw milk market is quite calm and actually stable in terms of price.

The market for milk powders is further declining. There are several reasons for this. Firstly, the price on the world market is falling, as was clearly evident from the latest results last week GDT Pulse. In addition, matters such as exchange rates also play a role. Europe is no longer so competitive and this is immediately reflected in the quotations.

Resistance
What is special is that the quotation for skimmed milk powder feed offered more resistance and, according to various parties, is even more expensive than skimmed milk powder food. This is another consequence of the futures market price speculation referred to above. Skimmed milk powder is too expensive for the animal feed industry, but because the product is used as a hedge against future market risks, this is not reflected in the price formation.

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The whey powder price also saw a decline, but here the market is still being held up well by good demand for 'higher' WPCs and WPIs for sports and health nutrition.

The price of whole milk powder is stated to be an exception. There is one plus point to note here.  

Cheese remains the strong anchor for the dairy industry. Certainly for the producers of Gouda foil cheese, whether they are in the Netherlands, Germany, Belgium or elsewhere. Gouda foil cheese (and Edam) attracts the cheese market in Northwestern Europe. While last week a price of €4.000 per ton seemed far away, it is now suddenly much closer and certainly not unattainable. Moreover, various parties in the market have written down this price.

Cheddar cannot keep up with this development and is even slowly sinking further. This is a special phenomenon, which was not seen in most previous years. Perhaps it indicates a change in the sales market and/or changing preferences among consumers and processors.

Natural cheese cannot keep up with the price development of foil cheese, but it is still recording a plus.  

The expectation of many parties in the market is that this situation will improve again in a few weeks and that natural cheese will be able to regain the usual additional price.