The dairy market is showing cracks in April with falling prices on the Global Dairy Trade, while milk prices are actually rising. This is putting market dynamics under pressure. Read more about the development of milk prices and GDT.
With a decline of 3,4%, the average price dropped back to $4.228 per ton. Milk fat, in particular, and to a lesser extent cheeses, took a hit. Milk powders also declined.
Butter price plummets
Butter fell by as much as 8,1% to $6.181 per ton. The large price difference between New Zealand product from Fonterra and that of the Belgian supplier Solarec, which also sells via the platform, is striking. Belgian butter is $1.705 per ton cheaper. This is linked to the high butter stocks in Northwest Europe. In recent weeks, the DCA butter benchmark had already declined following an earlier Easter rally.
After four consecutive increases, the GDT price of mozzarella fell by 6,2% to $3.945 per ton. Only European product was traded. Cheddar fell by 3,1% to $4.766 per ton. This concerned exclusively New Zealand product. Incidentally, European cheddar is considerably cheaper on the physical market.
Milk powder market reaches ceiling
Milk powder prices on the GDT are showing slight declines. Skimmed milk powder has risen by 50% since the start of the year to its highest level since October 2022, but fell yesterday for the first time by 1,6% to $3.381 per ton. The market thus appears to be reaching a ceiling. European product is also considerably cheaper here than New Zealand product, which is favorable for the export position.
Whole milk powder fell by 0,7% to $3.687 per ton, continuing its downward trend. Incidentally, European product is slightly more expensive here than New Zealand product.
Rising milk prices
Meanwhile, milk prices in the Netherlands are rising broadly this month as a result of higher dairy prices earlier this year. Following FrieslandCampina and A-ware, Lactalis Leerdammer has also increased the payout price. For May, however, further increases seem less certain.
The physical European dairy market showed a weaker impression in the week before Easter, with slightly falling prices for butter, cheese, and milk powder. This depresses the commodity value of milk, as shown by the DCA Market Intelligence valorisation tool.
The lower GDT result will likely further weaken market sentiment. Additional supply will become available towards the seasonal peak in milk production. At the same time, butter stocks remain high. Cheese is being delivered relatively young, and demand may weaken after Easter. The milk powder market is losing support from the oil price. Brent crude fell by $15 last night to below $95 per barrel following the truce in the Middle East, although the market is likely to remain volatile in the near future.
Price target of €40
Rising milk prices are currently unrelated to the underlying dairy market, which is actually showing signs of weakening. With falling GDT quotations, rising stocks, and an approaching seasonal peak, further increases in May are uncertain.
A price level of around €40 per 100 kilos is a plausible target for base milk prices. This price level can also be paid by the factories. Moreover, European exporters retain their price advantage on the world market even after the downgrade of the GDT.