Analysis milk
Large milk supply makes itself felt on the spot market
Prices for butter, cheese, and milk powder are rising, while the spot market for raw milk is under heavy pressure due to high supply. This contrast is putting the dairy market on edge. Read more about the gap between spot milk and dairy prices.
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What's remarkable is that this rising market appears virtually decoupled from the spot market for raw milk and the market for milk concentrate. Here, the large milk supply is making itself felt. On average, more milk is coming in than the industry can process. Consequently, since roughly mid-December of last year, large volumes of raw milk have been marketed at above-average prices. The Dutch spot milk price is currently barely a quarter of the average base price paid by the factories.
For a comparable situation, we have to go back about ten years to 2016. In the meantime, the spot milk price has only occasionally been very low around the turn of the year, but often not even then.
The market for semi-finished products shows a diverse picture. As mentioned, the price of cream has risen considerably, but is still volatile. Meanwhile, the price of skimmed (de-skimmed) milk and skimmed milk concentrate is experiencing much the same fate as the spot milk price. There's virtually no market for skimmed milk—containing 96% to 97% water. It's too expensive to transport. Skimmed milk concentrate is selling slightly better, but remains very cheap. Some of this product could be sent to Southern Europe for fresh production, if transport costs allow. The majority would have to be dried into skimmed milk powder.
There's currently a difference of almost €2.000 between the price of concentrate and the price of skimmed milk powder, but this can only be monetized if a drying tower is available. There's a shortage of these, however, as they've been demolished in recent years or are only available in Eastern Europe.
It's a problem, but the dairy market as a whole isn't suffering significantly, as long as prices for cheese, milk powder, butter, cream, and especially whey continue to rise. Liquid whey is one of the few products whose price has remained relatively stable (and high) in recent months. This is due to the high demand for whey for the production of higher WPCs as a protein source for sports and health foods.