Dairy market sprints further up on one leg

Dairy farmers benefit from this, because the milk price will increase and will be considerably higher than last year, although it will not be a repeat of 2022. Protein prices are not participating enough for that.
However, the rather one-sided but strong demand for milk fat is doing special things to the market. The spot milk price for raw milk has peaked this year as high as in 2022, although shorter so far. The spot milk price has also been clearly above the factory price for the last four to five months, and also above the average milk valuation (which is not fully reflected in the graph below, because the Rohstoffwert is based on German conditions).

Last week the price of cream already rose to a record of more than €10.000 per tonne of doge matter, but that soon turned out not to be the end. The need for milk fat is far from satisfied. This is because, on top of the usual factors, there is still a Christmas demand to be met. The DCA quotation therefore rose by almost 4% to €10.555 per tonne of dry matter, and of course there were also some upward peaks. In France, the most is paid for cream, as well as for raw milk (€70 per 100 kilos and more). In France, the demand for milk is so great that milk from elsewhere (Belgium, the Netherlands) is now also welcome.  

As expected, the cream price pulled the butter price up again, but just a little bit slower. Nevertheless, the DCA quotation for butter went well over the threshold of €8.000 per tonne, because €165 more was added (total +€280). That is a historically high price level, but actually still far from what fresh butter should cost at the current cream price. However, nobody is psychologically prepared for a butter price of €9.600 per tonne. In Germany, meanwhile, sometimes more than €9.000 per tonne is already being calculated. Before the market as a whole has reached that point, all existing warehouses will have been checked again and many buyers may have dropped out.

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Due to the further increase in fat prices, the prices of other derivative products must also increase, such as whole milk powder. This is also happening, but whole powder is not a very liquid product. Moreover, it has to deal with competition from a much cheaper product from New Zealand. The milk powder market is simply much more of a global market than the market for liquid dairy.

However, the milk powder market without calculated milk fat is moving better. In New Zealand, more interest is being signaled from Asian markets and the European market is getting help from better demand from Africa (and less pressure from New Zealand).

It is not yet the case that the milk powder market is also getting wings. The movements are still too limited for that, but the upward trend can be caught again.

That cannot be said about the cheese market. Last week, the prices for foil cheese seemed to increase slightly, but it did not continue. The foil cheese quotation is unchanged this week and weak compared to butter. For some producers, that is a reason to change course and start producing more butter. After all, that also helps the cheese quotation to go up again.

It is also not the case that the entire cheese market is in a minor key. Natural cheese is better priced, but also more expensive to produce. Other, smaller types in the Netherlands, do fetch better prices, but the entire industry cannot focus on that either.    

In the end, it is still the milk fat that continues to carry the dairy market, whether it is in cream, butter, Greek yoghurts and full-fat cheese. Protein plays a more limited role. Yet this product scores too. Not in bulk powders, but less visible in sports drinks and special products.