Lost plus spot milk in another declining market

The higher spot milk price in the Netherlands is simply a recovery compared to the situation before spot milk in the Netherlands (and Belgium) came under increased pressure due to outages and maintenance at several large factories. It's not a sign of market recovery. Next week there will be another shutdown due to maintenance. This could further depress the Dutch spot milk price.

It's a shame for producers that little to no profit is being made from it, but at least the pressure on the internal market can be relieved. The price under the most pressure this week is once again the price of skimmed milk concentrate. Its DCA price fell by 8,5% this week to €1.350 per tonne (dry matter).

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Factories that can't process their own milk often sell part of their surplus as concentrate at a loss. This week, there were many suppliers again throughout Northwest Europe. Buyers could seize their opportunity. Most of them are trying to process this concentrate into skimmed milk powder. A gross margin of €600 to €700 per tonne is attractive to them, but this requires the availability of drying towers. The downside of the massive processing of surplus concentrate into skimmed milk powder is that it puts further pressure on the price of milk powder. This is also reflected in the price trend for skimmed milk powder, although the decline doesn't seem to be too significant yet.

Cream and butter
Cream, the other product left over after separating and concentrating milk, is still holding its price somewhat this week, though its price did drop by 1%. Butter prices fell slightly further.

According to many sources, a lot of butter is currently being produced in Europe, so there's ample supply. This is supplemented by product from New Zealand and the US. Oddly enough, New Zealand butter isn't even cheaper than European product at the moment. At the last GDT auction, European butter was around €300 per tonne cheaper than New Zealand butter. Yet, the butter price here seems poised to fall even further. American product is much cheaper, and many sources suggest European production is too high. 

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Pressure on cheese prices continues
In contrast to the largely calm milk powder market, the cheese market is also under considerable pressure. Converting milk into cheese and whey (products) remains a relatively attractive option compared to other commodity options.

While cheese prices have fallen sharply, whey processing remains financially quite attractive – and cheese still needs to be sold. That's where the problem lies. Cheese stocks are running out and getting older. Too much of anything is blocking the market, and only drastic measures will help.