Dairy market comes loose from its anchors

Although dairy prices dropped sharply last week, this week it went even further down. You could say that the market has come loose from its anchors. This means that a lot of value is evaporating from the market again, that payment prices are coming under even more pressure, but also that there is a bit of new demand, even here and there for export. Although most of the pain is still being felt in the butter and cream market, and in the cheese market, it was this week in skim milk concentrate that the strongest price declines were recorded. The DCA quotation ends this week 15% lower than last week. Few would likely have expected this, but it is actually not surprising. The massive release of this product indicates the state of overwhelm in the industry. Where companies do not necessarily have to make an effort, they let it go. The absolute price level of concentrate is still not record low. Products are being offered from France that are up to €300 per ton cheaper – excluding transport costs. On the spot market for raw milk, the price has also dropped significantly. Interestingly, this week it was exactly in the Netherlands. Companies were sending out milk on a large scale, and it no longer had to happen quietly across the border with the eastern neighbors. The Dutch spot quotation fell by almost 13%. Per ton of product, however, the largest amounts also went up in smoke this week for butter. There, 9.7% of the DCA quotation was lost, while the cream quotation had to give up 7%. Butter oil has also had to give in. Although cheap butter from New Zealand and the US continues to enter the European market, the price difference with EU butter has significantly decreased. Parties that aimed for a high margin for the foreign product may not achieve the intended profit, but the internal market price in the EU has been strongly driven down partly due to that import. Perhaps the price decline has now overshot in a market overreaction. Those who initially speculated on a lower butter price now see the market drop faster than they had speculated. However, this is not only due to the import, but rather due to a confluence of circumstances, such as an unexpectedly and persistently high milk production in various EU countries and a developing exchange rate that is unfavorable for the EU, making export difficult. Prices in the cheese market are also speeding downwards. Gouda foil cheese lost more than 6% of its value per kilo this week and is now priced at less than 3.40 per kilo. Mozzarella has dropped even further, and Cheddar is quoted below €4.00 per kilo. Around these quoted prices, there is a wide spread of individually paid prices, which is characteristic of a situation with large changes in the market. Prices in the milk powder market have also dropped again, but less quickly and far than in other commodities. However, magical barriers are slowly threatening to be broken here as well. Skim milk powder is currently quoted at about 2175 per ton of product, but there is also a wide spread in prices here, with some products being sold for under €2100 per ton. Other milk powder prices are also moving downwards. The whey market seems to be escaping all the negative trends in the market so far. Whey concentrate is priced slightly lower, while regular 'flat' whey powders are following a fairly stable price pattern. Whey powder feed has even become slightly more expensive, as has lactose. However, these are the white ravens in an otherwise difficult market.