Dairy market sees corrections, but oversupply remains

The market for liquid dairy remains weak. A large supply of raw milk and concentrate sets the tone, plus a further weakening cheese market, but also a somewhat recovering market for milk fat and more stable powder prices. This is in a nutshell the picture of the dairy market this week. An uneasy and unclear week. For raw farm milk, slightly lower average prices were recorded than last week, but by the end of the week, prices in the Netherlands seem to be rising again slightly. The supply of farm milk remains large. This, combined with the fact that a lot of factory maintenance was scheduled during these weeks, led to sustained pressure on prices. Because, it was difficult to get milk placed. In some cases, that didn’t even succeed. However, the expectation is that from next week more capacity will be available to process milk. The situation this week did lead to the remarkable circumstance that dairy farmers receive €56.00 or more per 100 kilos for their milk, while the surplus milk is sold on the spot market for half of that or in some cases even less. Processors are also putting quite a lot of skim milk concentrate on the market at prices below €1500 per ton. French product is even offered for around €1300, but the extra transport costs to the drying facility negate the price advantage. For companies that can dry concentrate, the mentioned prices are interesting, because they can still achieve a nice margin when processing into skim milk powder, even though this product is also low-priced. Skim milk powder and also other milk powders have dropped in price again in recent weeks. For regular producers, this is not pleasant, because with ordinary farm milk, against average payment prices, there is little to nothing to earn. However, the current low price does provide an opportunity to export milk powder to destinations outside the EU, as the European product is currently cheaper than comparable products from New Zealand and the US. This is despite the unfavorable euro-dollar exchange rate. Customers in North Africa and the Middle East are therefore also back in the market. Export does ease the pressure on the internal market. Meanwhile, producers are still hesitant to truly hope for an improvement in the market. There is a quite large global supply of dairy. The price development for milk fat is a small bright spot this week. Both cream and butter prices are slightly increasing again. According to many, it is safest to label this as a correction. They are not sure if a bottom has really been reached regarding fat prices. The hope is that in the coming weeks some extra demand will arise as food companies want to stock up some products in anticipation of Christmas and the New Year. Meanwhile, the cheese market continues to decline and a bottom does not seem in sight yet. It is said that less cheese would be produced, but little evidence of that is currently visible. However, there is a belief that many buyers are short covered in terms of stocks. So, the market could pick up quickly, but buyers also notice that waiting a little longer pays off. Cheese producers receive some compensation for the low cheese prices from the good whey market. This does not concern the market for ordinary whey powders, but for that of whey concentrate and especially for the 'higher' whey products. WPC80 (whey protein concentrate with 80% protein) still brings around €12500 per ton.