Spot milk prices react as you would expect

After a fairly stable month of April, spot milk prices have clearly been trending upwards since the beginning of May. The DCA quotation for the Dutch market has since increased by €4 to €41 per 100 kilos. In recent weeks, bids have also been made at levels a few euros higher, but factories are not prepared to sell volumes at the moment. This is also logical, given the spot milk quotations that are still significantly below the payout prices.

Seasonal pattern
The revival fits the pattern of previous years. If we look at 2023, the market also turned around at the beginning of May, although the recovery was slightly slower. The turnaround was also expected based on the five-year average. The recovery is usually strongest in May and the rate of increase slows down somewhat in the summer months. This scenario is also likely in the coming months. Based on the raw material value of milk, there is further potential for growth, at least towards the level of the payment prices. This range is roughly between €45 and €50 per 100 kilos, depending on the factory and milk flow.  

wet spring
The peak of Dutch milk supply normally takes place in the third or fourth week of May, but various factories have informally announced that there is not really a production peak this year. The daily volumes that were visible in April continue this month. The wet spring weather probably plays a role in this. So far, the number of grazing days is still limited. The supply figures for May should provide a definitive answer, but that will take a few weeks.

The weekly milk supply figures in Germany published by ZMB show that the production peak has already occurred there at the end of April, unless production picks up unexpectedly in the coming weeks. In France, the peak also occurred a few weeks ago, according to figures from France Agrimer. Moreover, French supply has recently fallen below the 2023 level and supply figures are also well below the long-term average. A lot of French milk is often pumped onto the European spot market around the seasonal peak, but traders indicate that this year it is not too bad.

Solid foundation
Based on current knowledge, supply volumes in Northwest Europe do not appear to increase excessively in the coming months, as Rabobank also indicated in a recent publication. Supplies of finished products, especially butter and cheese, are limited. This provides a solid foundation for the dairy market, with a real prospect of further price increases that have already started recently.