Analysis milk
Old indicators no longer reflect the dairy market
To continue to properly understand the dairy market, it is no longer sufficient to look at the familiar indicators: the spot milk price and quotations for milk powders and whey. The prevailing view is that an extremely low spot milk price is also a sign that things are going extremely badly elsewhere in the dairy market. And with a 'relatively minor issue' quotation from ZuivelNL or another institute, you expect predominantly 'business as usual'.
Read this article?
Become a subscriber and get instant access
Choose the subscription that suits you
That is not the case on the dairy market at the moment. The spot market price has been terrible for months. Even worse in recent weeks.
However, the rest of the dairy market is not really participating, with the possible exception of the milk fats division.
To put it bluntly, the dairy industry is not on its last legs either. Moreover, dairy farmers are currently not receiving extremely bad prices. The industry even stepped up a gear over the past month.
While the spot market price remains poor this week as well, and the prices of semi-finished products such as skimmed milk concentrate and cream are relatively well below their value, the market for skimmed milk powder is flourishing. To illustrate: with a current milk powder price of around €3.000 per ton, a concentrate price of about €2.200 per ton (dry matter) would be appropriate, not €720 as is the case now.
With a butter price of well over €3.800, the cream price should be €4.800 or €4.900 per ton of dry matter, not nearly €3.200, which is what it is now.
The market, however, is always right, even if it might feel otherwise. But should you then say: it is a pity that there is insufficient capacity to dry all the milk and semi-finished products, or: fortunately that not everything can be dried? The tight drying capacity largely determines the market. But high powder prices and shortages in the US, plus a low supply in Oceania, also have an influence. Those latter factors are reasonably well understood.
However, the existing indicators pay too little attention to what is happening in the whey sector. The whey market is expanding enormously and can no longer be captured solely by a simple quotation for feed whey powder.
An increasingly large proportion of whey is going to high-quality food destinations, at much higher prices as well. Consequently, whey yield carries increasing weight in determining the milk price.