Analysis Dairy
Rising dairy market is smiling at milk processor again
The signals on the dairy market are green for close by, but for the new year they are still orange, or perhaps even red. In terms of market expectations, it's a mixed bag. This does not alter the fact that the fourth quarter for milk processors is much better than they probably expected in advance.
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In the meantime, it is no longer a surprise that liquid prices are easily holding up this fall. In fact, the quotations for cream and milk concentrate are also on the rise this week. Spot milk prices are now flirting with €50. These are signals that the availability of milk in Northwestern Europe is extremely tight. Processors are careful with the supply of their members or suppliers. That is only logical given the significantly higher prices for cheese, powder and butter.
After three lesser or even bad quarters, dairy producers can finally make decent margins again. After all, the raw material value of milk is just below €50, which is well above the payment prices. However, milk prices have recently risen again.
Cheese
Cheese production currently provides the best valorisation of milk. The quotations of Gouda and Edammer will pass the level of €4.000 per tonne this week. An excellent price level historically. Whey powder can also be valued well. However, foil cheese prices for delivery in the new year are at a lower level. The price often starts with a 'three'. This indicates that the rally in the cheese market is likely coming to an end. Not surprising, because the milk supply has recently increased seasonally. The first quarter is usually a weak period in terms of sales. Some traders fear major corrections, others think it won't be too bad and assume a relatively stable market pattern in the coming months.
Powder and butter
What applies to cheese also applies to butter. For close, the market is optimistic with prices above €5.300 per tonne, or even higher. For further afield, insiders will just have to see. There are few traders who are currently stockpiling for speculative purposes. That is not very easy either, because fresh butter is hardly available. The milk powder market is picking up again this week after two bad weeks. The quotation of skimmed milk powder rose by just €100 to €2.630 per tonne. Feed-grade product moves sideways, widening the price difference again. Further upside potential for milk powder also appears limited after a strong recovery.