Analysis Milk
How FrieslandCampina surprises friend and foe
It was clear in advance that FrieslandCampina's guaranteed price would increase before December. However, many had not anticipated an increase of more than €4. The competition probably won't either. This is now more or less being put on the spot to increase significantly. Whether that will happen is another matter.
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It proves once again that sentiment on the dairy market can be erratic. In September, processors struggled to keep payout prices above €40. Sometimes that didn't work anymore. A few months later you can dream about €50 again. FrieslandCampina gave living proof on Monday by increasing the milk price by no less than €4,06 to €45,53 per 100 kilos. PlanetProof participants even earn €51,83.
The sometimes reviled dairy cooperative from Amersfoort, which has seen many dissatisfied members leave in recent years, is showing its best side. Something that can also be said sometimes. Apparently, not every switcher is happy with his choice, although there was of course a lot of money to be made through the severance package of the now closed DMF fund.
Already seen
The significant increase is reminiscent of 2022 when milk prices eventually shot up to above €60 per kilo and then plunged into the abyss. Things won't go that fast now. However, a milk price of €50 seems feasible. Based on the valorization of Gouda foil cheese and whey powder, the raw material value is already above this level. Milk prices on the spot market have also been approaching this limit for some time.
Whether the other processors will follow FrieslandCampina's lead will have to be seen in the coming weeks. Many dairy producers achieved meager results in the first three quarters, often after record profits in 2022. The idea was to straighten out the balance sheet in the fourth quarter, but then the payment prices should of course not be too restrictive. That is why the significant increase in the guaranteed price was received with surprise and even some skepticism. Member dairy farmers of FrieslandCampina also did not see it coming, but are nevertheless positively surprised. It makes up for the pain of a missed back payment for 2023.
Tone is set
The question is whether other processors also have such a nice surprise in store for their members or suppliers. At an autumn meeting of another dairy cooperative, it seems to have been said that the milk price will no longer rise in 2023 anyway because the balance sheet would not allow it. The question is whether these statements hold up with current knowledge. Whatever the case, processors will probably have to do everything they can to keep up with FrieslandCampina. This week Arla, DOC Kaas and A-ware will announce their payout prices and we will know more. Also whether A-ware will come up with a December bonus again. This was generously done in 2020 and 2021, but last year the Christmas bonus was not received. Possibly because the dairy market collapsed at the time, while the milk price had just risen to a record high.
In any case, December promises to be an interesting milk price month, with FrieslandCampina setting the tone. Let's hope for them that the dairy market manages to hold up in the generally weak first quarter of the new year, otherwise the sharp increase in the guaranteed price could have been an error of judgment.