Cheaper butter and cheese, but the market remains firm

The strongest price drop this week has been for skimmed milk concentrate. The price of this fell by 6,3%. This is partly a lag effect of the southern German floods, which means that a lot of concentrate has to find another destination, the ample availability of milk in France, Germany and Northeastern Europe and the cool weather.

The latter is not helpful for the sale of fresh dairy. This fairly cool weather also seems to be the cause of the mozzarella market stagnating, but more about that later.

In addition to skimmed milk concentrate, the butter quota also fell by 4,4% compared to last week. It is partly a correction to the rapidly rising prices for milk fat and also a response to an unexpectedly low butter contract from German manufacturers with Aldi. This supermarket chain has entered into a monthly contract for the supply of butter in retail packaging for €6.300 per tonne. That is several hundred euros below the spot market price, but that appears to be because the suppliers use cheap, non-German cream as raw material.

Either way, the market was shocked. Remarkably, the cream price in Northwestern Europe was almost unaffected. Many market parties in the butter market expect that the butter market will remain relatively high and that prices may stabilize or increase slightly this summer, before rising further later this year. There may also be some wishful thinking in this. The price of butter is already quite high. Alternatives based on vegetable fat can be strong competitors in terms of price.

The milk powder market appears to be returning to the situation it was in for months: sufficient supply, but weak export demand and relatively low prices. Fortunately for powder producers, milk fat is expensive and sales of butter and cream make up for a lot. The quotation for whole milk powder increases due to the expensive milk fat. However, whole milk powder is not a widely traded product in Europe.

The whey powder market is also quite weak, but the WPCs and WPIs (the more expensive whey derivatives) are again in good demand and at a good price.

By the way, it is not just lower prices that can be recorded for liquid dairy. The spot milk quotation in the Netherlands and Northern Germany is picking up again, although it is still below the payment price of the factories

Last week's decline was caused by a combination of factors, including the floods at the foot of the Alps, maintenance of factories, which also meant they were not in operation and a recovery in milk supplies in France and Germany. The supply in Eastern Europe is already quite high.