Spot milk price retreats to almost forgotten lows

In the dairy market, many have already braced themselves for a significant reduction in the Guarantee Price from FrieslandCampina next Monday. In the lead-up to that, the spot market has been suffering with prices in the Netherlands below €30 per 100 kilos. There is a story attached to this ultra-low price level. Additionally, there seems to be cautious light at the end of a pitch-black tunnel that the dairy market has been in for weeks now. The spot milk benchmark from DCA has been around since 2007, but the drop has never been as large as now. And we are not even in the broken weeks around Christmas, during which the market always struggles. With a drop of €12, the benchmark falls back to €29.50 per 100 kilos, or a decrease of 29%. Looking over a slightly longer period, €20 has evaporated in four weeks. The rapid decline is an unfortunate combination of a much larger milk supply in the Netherlands and factory maintenance at various large parties. There is hardly any buying interest due to the poor valorization of milk resulting from the struggling dairy market. Belgian milk is also cheap and is being offered around €30 on the market. In Germany, the situation is less critical with prices at €35.50 per 100 kilos. However, it also applies here that spot milk prices are heavily below the payout prices. Milk price collapses The Dutch spot milk price currently fits almost twice into the Guarantee Price of FrieslandCampina. This situation cannot hold for long, as next Monday the dairy cooperative will announce the price for October. There is no doubt that a significant correction is coming. The question is how gloomy the outlook is in Amersfoort for the market. A correction of around €4 is expected. Other dairy factories in the Netherlands hope that the dairy cooperative will not act too rashly, as high milk prices are beginning to bite significantly with raw material values below €45 per 100 kilos. At the same time, no one wants to lose members and suppliers by lowering too drastically. Reducing the milk price is precision work these days, but the market is crying out for drastic corrections. The silent hope is that FrieslandCampina, as market leader, will take care of the dirty work on Monday and thus set the trend in the market. Fat market less negativeMeanwhile, the market is somewhat recovering from the free fall which is even experienced as historical by some market players. The price drops this week are of a different caliber than in previous weeks. The DCA cream benchmark even shows a slight increase of €60 to €6,060 per ton. This is attributed to the winter demand that cautiously reappears at this time of year. The butter benchmark is still dropping, but more positive signals are cautiously coming from the market. Buyers realize that prices cannot keep falling indefinitely and are returning to the market. Can cheese stabilize?The rapidly falling cheese prices are also slowing down. The benchmark for Gouda is dropping by €30 to €3,330 per ton, nevertheless the lowest level in over two and a half years. The pressure on Cheddar is still greater due to the abundant Irish supply. Whether cheese prices can stabilize permanently will have to be seen in the coming weeks. The crucial question is how large the actual stocks are. Some parties speak of persistently young delivery ages, but not everyone agrees. Reportedly, cheese is also going into storage. Furthermore, the milk supply volumes are still growing, in Germany the lead is now 5% year-on-year. Powder market remains weakThe situation on the milk powder market remains more or less the same this week: The slight price pressure continues due to ample stocks, high supply volumes, and the ever-strengthening euro. The whey powder market is, however, showing cautious signs of positivity.