Liquid dairy market falls to unrepresentative trough

It's expected that the currently extremely low spot prices won't hold up after New Year's. On the other hand, it's also unlikely that prices will simply rebound to their previous levels, as they did in August or September of this year. So, even though the market low isn't representative of the market as a whole, it does send a signal. 

Prices for liquid dairy, as well as cheese, butter, and most other dairy products, will take a further hit in the new year compared to the year that has almost ended. This is because milk supply remains high, while the market is not showing much more demand.
There are export opportunities, but only if prices remain sufficiently low.

The chart below shows how the current spot market price compares to the value of milk processed into skimmed milk powder and cream, and to FrieslandCampina's guaranteed price.

It is therefore expected that the price ratios will become somewhat more balanced in the new year, but not completely. With the arrival of the new year, a new milk price/guaranteed price will also be established.

Now, a combination of short vacations for truck drivers and factory workers, a persistently high milk supply, and consumers doing less than usual shopping has created a very difficult situation on the spot market. Demand for milk is lower, fewer milk and whey drying towers are operating, and transport is particularly scarce and expensive.

The market is likely to pick up somewhat during January, but demand has been quite weak so far. Cheese prices, for example, have been slightly more positive in recent weeks, but producers and traders don't anticipate an upward trend in prices in the coming months. A downward trend is even more likely. Foil cheese is expected to fetch well below €3000 per tonne.
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The butter market also doesn't look very positive in the long term. This week, the DCA price did register a small increase, but that's in a thin market, with a smaller number of buyers. January is expected to show a different picture. The price for cream is again lower than that for butter this week, but cream remains the liquid product that retains the most value. Its price is expected to rise above that of butter again in January.
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Whether the price of milk powders will continue to rise remains difficult to say. This week, most milk powders saw a slight price increase, while whey powder food experienced a slight headwind.

Skimmed milk powder currently benefits from the exceptionally low price at which European product can be offered on the global market, but this doesn't generate any profit for the dairy farming sector. A rapid change in this situation still seems difficult due to the continued high global milk supply.