Analysis Milk
Fight for cream marks scarcity on the dairy market
Cream prices have been rising for eight weeks now and the top of the market is not yet in sight. The liquid dairy market is characterized by scarcity and that drives prices. The rapidly increasing solid dairy products in the form of butter and cheese are also helping.
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Traders are often still on holiday, but the market doesn't care about that. They will probably have to switch gears after their break when they see the prices. DCA's spot milk quotation for Dutch milk now stands at €51,50 per 100 kilos and thus shows the line of payment prices that are also moving in this direction. Based on the valorization of milk, these levels are also acceptable.
Commodity value on the rise
The raw material value of milk has gained significant ground in recent weeks. The main driver of this is the rapidly increasing milk fat prices, which are on their way to a new record. Given the extreme scarcity, this seems to be a matter of time. Occasionally, lots are already being traded above the record level from 2022. Cream prices are also rising and are even somewhat overvalued compared to butter prices. This is because the fresh segment is also fighting for the cream these days, just like butter producers. This terminology may sound a bit heavy, but it is not excessive.
Cream supply very scarce
Insiders indicate that it is difficult to obtain volumes. Producers who normally have surpluses are now trying to purchase milk and cream. DCA's cream quotation rises this week by €180 to €8.675 per tonne, the eighth increase in a row. Historically speaking, the increase will continue for a while. The market often peaks in November, at the trough of European milk supply. This promises something for the coming months, although there is a lurking danger of overestimation. The high purchasing interest is also a signal that dairy producers have confidence in the market. They try to build up stocks of butter and cheese, which are rapidly increasing in value and are almost non-existent.
Protein side not so positive
The protein side of the market is lagging behind somewhat. This is also evident from the DCA quotation for skimmed milk concentrate, which drops from €40 to €2.135 per tonne. The market is less favorable for milk powder producers. Due to the loss of Chinese demand, skimmed milk powder stocks in Europe have increased considerably. Milk concentrate was still available from the fresh segment in recent weeks, but that seems to be weakening somewhat. Moreover, organizing transport is a challenge to drive large volumes to countries such as Greece or Italy. And the costs are also high.