Yo-yoing semi-finished products and spot milk that is too cheap

Skimmed milk concentrate drops by €500 to €860 per tonne of dry matter according to the DCA quotation. That is a decrease of nearly 37%.

The strangest thing is not so much the extent of the price drop as the cause, for who can pinpoint it? Is there a massive oversupply, leaving no choice but to write down the value, or has the profitability of drying concentrate suddenly dropped sharply? There are other possible explanations, but which one is the correct one?

The drop in the cream price of €660 per tonne of dry matter, or 15% compared to last week, is also substantial, but still smaller than for concentrate. The butter price is also falling, but by nearly 6%, much less so.

Spot milk prices for raw Dutch and German milk are under slight pressure, being lower in the Netherlands than in Germany. However, there is not much difference compared to last week (and the weeks before). Spot milk prices remain at a very low level for an unusually long time.

This does not pay the farmers' milk price. Solid dairy products make a larger contribution, especially cheese, whey, milk powders and, to a lesser extent, butter.

Prices for skimmed milk powder are virtually stable. The price for whole milk powder is lagging slightly and is also under slight pressure.

Whey powder prices, on the other hand, are stable to slightly rising. Relatively high prices are being paid, particularly in Germany. Due to this and the good returns achieved with whey concentrate, the revenue from the cheese and whey package contributes most to the milk price for the dairy farmer. Even if cheese prices decline slightly.

The combination of skimmed milk powder and butter or cream is lagging slightly in terms of returns. The price of milk powder generally remains at a good level, but beneath the surface, the picture is a bit more nuanced. Europe can still export well at very competitive prices, but business is clearly more difficult for a number of destinations in the Middle East. This is due to the war surrounding Iran. Not all destinations are easily accessible, and the purchasing power of a number of countries in and around the war zone is also declining.

This does not mean the dairy market is in trouble yet, but it could be tense in the coming weeks to see whether the market can maintain the positive sentiment of the past few weeks.