Analysis dairy business
Milk powder market makes a resigned impression
Milk powder prices are in a downward spiral. A lack of (export) demand in combination with fairly ample inventories creates a somewhat resigned market sentiment.
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With the current rate of decline, the DCA quotation for skimmed milk powder is in danger of soon falling below the level of €2.500. Over the past four weeks, the price has fallen slightly each time. While price pressure on the cheese and butter market emerged at the beginning of December, the milk powder market has been struggling for some time. The market is in calm waters because there are few sales options.
However, there was some commotion in the market earlier in December due to a tender from the Algerian state purchasing agency ONIL. This has likely gobbled up supplies. Otherwise, the thinking goes, prices would probably have already been at a lower level.
In two minds
Before 2024, the milk powder market seems to be in two minds. On the one hand, there is no reason to expect major price pressure, as milk production in Europe is not excessive. This means that there is no great supply pressure among traders and producers. On the other hand, current sentiment appears too timid to expect a price rebound. Therefore, traders are reluctant to take positions.
All in all, the market lacks some momentum. This is also because the prospects for the Chinese sales market are not very good. The country is in an economic crisis, which is unfavorable for dairy consumption. Milk production in China has also increased significantly, which means that the import requirement has shrunk on paper. Moreover, European export figures in the first three quarters of this year were the same as in 62.000 at around 2022 tonnes. Compared to the peak year of 2021, a major decline is visible. However, sales to Algeria increased by 54% to 120.000 tons. This means that the African country has now far surpassed China as the most important sales market for European products.
Not competitive
It is striking that the New Zealand dairy cooperative Fonterra recently reported a recovery in demand in China. European exporters cannot yet discover this. This may be because European products, expressed in dollars, are less competitive on the world market. Earlier this year the tables were turned. American product is also slightly cheaper.