Lurking heart attack pushes down liquid market

However, the price of cream also fell sharply this week. At €590 per tonne (-12,8%), the decline was only 1 percentage point behind last week's movement. The price of butter, however, eased up somewhat this time.

Raw milk on the spot market, however, fell in price roughly as much as skimmed milk concentrate, and the closer it gets to Christmas, the further sales prices for liquid products fall. The spot milk market is now at its lowest level in five years.

Many producers and traders then see a kind of milk infarction looming and are now making arrangements (or have already done so) to ensure that liquid product is removed, regardless of the price.

The lower the quality of the dairy product (permeate, buttermilk, even skim milk), the greater the chance that its final destination will be a livestock farm or a digester. This is also because transport becomes a problem. Normally, these kinds of concerns don't arise until just before Christmas, but this year they're coming to the forefront extra early.

Plus for prompt
It doesn't affect the entire market either. For some products – particularly cheeses, but also butter – an additional surcharge is still being charged for prompt delivery. This is because the product is scarce and some supplies still need to be stocked up before Christmas, either from restaurants or retailers. After the holidays, however, a different regime applies, and that extra demand disappears again.
This demand for even more product isn't changing the market as a whole. Almost all cheese prices are under pressure to some degree, with the exception of natural cheese.

The picture for powdered milk is virtually unchanged from last week. Prices for actual dairy products remain under slight pressure, with the exception of whole milk powder, which fell by almost 7%, primarily due to the sharp drop in the price of milk fat.

Concentrate cheap and in demand again
What's more, the quotations alone don't reveal that the skimmed milk powder market is quite dynamic. This was already discussed last week. Because skimmed milk concentrate has become so cheap, more and more processors are seeing an advantage and even freeing up scarce production capacity for it. Someone who buys concentrate for €900 per ton, processes it into skimmed milk powder, and markets it can make a profit of €1.000 to €1.100 per ton. While costs still need to be deducted, this easily leaves €500 per ton or even more in profit.

This comes at the expense of conventional producers, who receive expensive milk from their farmers, but it is a profitable model. The earning potential is so great that even pasture drying towers are being freed up for drying milk concentrate.

The falling milk powder prices are offset by rising whey powder prices. Whey proteins are and remain in high demand and expensive.