DCA benchmarks: Liquid commentary week 28

Weather conditions continue to have a significant impact on the European spot market for liquid dairy products. Spot milk prices rose sharply again this week, while the market for skimmed milk concentrate also strengthened considerably. The accelerated decline in milk collections has increased risk premiums across the market.Within just two weeks, the DCA benchmark for raw milk in the Netherlands has doubled to €40 per 100 kilo. For the first time in 15 months, spot milk prices have returned to levels broadly in line with the farmgate prices received by dairy farmers. Similar price increases have been recorded in Germany, indicating that the market imbalance has disappeared rapidly.The turnaround has been driven by successive heatwaves across Northwest Europe, which have had a significant impact on milk production. High temperatures have reduced milk deliveries to processors by an estimated 5% to 10% on a weekly basis. Markets that had been characterised by persistent surpluses are now, in some cases, facing short-term supply shortages.Market skimmed milk concentrate is wildThe same dynamics are evident in the skimmed milk concentrate market, where prices are also supported by solid demand from the fresh dairy segment. Buying interest is particularly strong from Southern European countries, including Italy and Greece, where the peak tourist season is boosting consumption.The DCA benchmark for skimmed milk concentrate increased by an exceptional €710 this week to €3,115 per tonne. Price increases of this magnitude are rarely seen in this market. Skimmed milk concentrate is once again trading above the value of skimmed milk powder, a market relationship that has occurred only sporadically in the past.