Dairy market is being hit from several sides

The price drops for butter, cream, and butter oil weren't entirely unexpected. In recent weeks, considerable pressure had been building, but there was also resistance to the price drops. At the beginning of this week, butter prices even seemed to be firming up again, but after a disappointing GDT auction on Tuesday afternoon, the floodgates opened. Prices plummeted.

The DCA price for butter fell by 5,6%, while the price for cream even plummeted by 6,7%. The price of butter oil also plummeted.

This is explained by a combination of good stocks, longer-than-expected weak demand, and minimal exports, while cheaper products are arriving from elsewhere. This is particularly true for the butter market. Prices have been quite high for a long time, even higher than the world market price. This didn't go unnoticed, and through clever agreements (inward processing), the duty-free import of cheaper New Zealand and later also American butter could be arranged. Moreover, under pressure from President Trump, cheap butter oil is also being allowed into the EU in other ways.

Something similar is happening in the cheese market. It too is grappling with the prospect that, for the first time in a long time, cheap American cheddar will be allowed into the EU. The European dairy industry is grumbling about this, but it probably won't make much difference. While 20.000 tons of industrial cheddar isn't exactly a volume to worry about, it is one of the pressures the European market can't really handle (and the price in the EU will be around €3.600/€3.700 per ton).

The European cheese market is also struggling with the consequences of a summer that lasted too long, accompanied by correspondingly weak demand. This, combined with milk production that has exceeded expectations in recent months, has caused cheese warehouses to fill up considerably. As a result, an increasing number of shipments of (foil) cheese, relatively old and offered at a higher discount, have been coming onto the market in recent weeks. As a result, DCA prices for cheese have fallen by roughly 4% this week.

Cheese producers have tried to limit production in recent weeks and partially switch to a slightly different range, but it has not helped much.  

Unlike butter, cream, and cheese, milk powder prices have been quite low for some time, but that couldn't prevent them from also taking an additional hit from last Tuesday's disappointing GDT auction. Expressed in percentage terms, the damage is more limited, but the pain threshold for milk powder has been reached sooner in Europe. The global market for powder is also low.

The whey (powder) market is less affected than the regular milk powder market, but is also feeling slightly weaker. In the liquid dairy market, raw milk prices are also continuing to decline, particularly in Germany.

A major exception amidst all the falling prices is the price for skimmed milk concentrate. It's almost 2% higher this week than last. This almost seems like a mistake, but there's good demand for this product, both for export to Greece, for example, and for use in contract production that has already been agreed upon much earlier.