DCA Benchmarks: Liquid market commentary week 29

The rapid rise in European spot milk prices came to a halt this week. However, concerns over milk availability have by no means eased. Market sentiment remains firmly supported by persistent heat and dry weather across large parts of Europe.Although milk collections recovered somewhat this week following the extreme heat a few weeks ago, the seasonal decline is progressing much faster than previously anticipated. This is not only the case in the Netherlands, but also in Germany, France, Italy and the United Kingdom, where milk production has also taken a hit. As a result, the milk surplus that weighed on the European dairy market during the first half of the year has rapidly disappeared.Stable or lower spotmilk benchmarksAfter last week's sharp increase, spot raw milk prices have stabilised. The DCA benchmark for Dutch spot milk remains unchanged at €40.00 per 100 kilograms, broadly in line with farmgate milk prices. In Germany, slight price corrections have emerged. Trading activity is thin, as processors have little or no milk available to sell. At the same time, buyers hoping for lower prices have largely stepped back from the market following the recent rally.Lower concentrate priceThe market for skimmed milk concentrate has seen a significant correction. Prices dropped by €365 to €2,750 per tonne. The decline is viewed as a logical adjustment, as processing concentrate into skimmed milk powder has become uneconomical at recent price levels, causing demand from powder manufacturers to fade. Some producers even sold contracted volumes on the spot market to benefit from the earlier price spike, resulting in a sudden increase in supply. While demand from the fresh dairy segment remains solid, it has not been sufficient to absorb the additional volumes.