Rising milk price is again in sight in this market

Both the butter and cheese prices of DCA have been making big steps upwards for four weeks in a row. The revival in the market is therefore certainly not a whim. The butter price has now climbed to €7.510 per tonne, which is the highest level since the end of last year. Since mid-February there has been a price increase of around 8%. Cream has risen even more with over 10%. Never before have milk fat prices been as high as they are now at this time of year.

Milk fat rises against expectations
Dairy traders had sometimes expected milk fat prices to fall, because milk supply in Europe increases seasonally at this time of year. However, the opposite is true, which means that they now have to buy butter at higher price levels than calculated in order to be able to deliver. This is an expensive affair for the companies in question. Butter stocks in Europe are already tight and due to this latent buying desire, this will probably remain the case for the time being. Especially since milk collections are very disappointing.

This is also evident from the Dutch milk supply figures for February. At 37.796 tonnes, average daily production was 2,62% lower than last year, taking into account the leap year. In Germany and France, too, provisional weekly supply figures remain well below last year.

Milk shortages drive up cheese prices
The scarce milk supply is also driving up DCA cheese prices, with it only a matter of time before Gouda and Edam pass the €4.500 per tonne mark. There are hardly any stocks, despite the fact that relatively much milk goes into the cheese vat, as this provides the best valorisation. Foil cheese that comes onto the market is and remains very young, however. This means that producers feel supported to demand higher price levels from week to week. Mozzarella is also increasing considerably in value due to a tight supply and is therefore on course to pass Gouda and Edam. Demand for this product is increasing, now that spring is increasingly in sight. The consumption of mozzarella is very seasonal and peaks during the summer months.

Milk powder market dissonant
The milk powder market remains the only dissonance on the dairy market, as has been the case for almost two years. The DCA quotation for skimmed milk powder dropped this week to €2.370 per tonne, the lowest level since last summer. The stronger euro makes it even more difficult for European exporters to find sales on the world market. Due to the weak demand, producers are now mainly producing for stock in the hope of being able to deliver at higher prices later this year. Whether this will succeed remains to be seen. 

Commodity value on the rise
The lagging milk powder market is not a game changer for the raw material value of milk and therefore the payment prices for dairy farmers. They are profiting from the increasing prices of butter and especially cheese. Depending on the valorisation, the lower end of the raw material value has climbed again to over €55 per 100 kilos, while the upper end of the valuation is €60, according to data from DCA Market Intelligence.

This means that the raw material value is above the Milk Price Index of DCA which has dropped to €53 per 100 kilos for the Dutch market. This means that milk prices could cautiously start to rise again in the coming months, provided that the increased dairy market remains intact.