DCA Benchmarks: Liquid market commentary week 35

The seasonal decline in milk supply is pushing prices higher across the liquid dairy market. In addition, concerns around a ‘Shamonda-like’ virus in Northwest Europe are weighing on milk production.For much of the summer, availability was more ample than tight, but this is beginning to change. Dairy processors are offering milk and liquid semi-finished products on the spot market less frequently. Alongside the seasonal decline in supply, persistent dry weather this summer is also constraining milk production. In short, the conditions are in place for liquid dairy prices to rise more strongly than underlying commodity markets would normally support.Relatively high prices voor SMCThe DCA benchmark for skimmed milk concentrate rises by EUR €105 this week to EUR €3,045 per tonne, the second-highest level since the summer of 2022. This level is difficult to reconcile with skimmed milk powder values, but the increase is being driven by demand from the fresh segment. This is common at this time of year. How long the situation will persist is difficult to assess. Over a longer horizon, skimmed milk concentrate would normally be expected to move more closely in line with skimmed milk powder. The liquid whey concentrate market is not moving higher, although underlying conditions do not feel materially weaker either. Nevertheless, the DCA benchmark declines by EUR €45 to EUR €1,390 per tonne.Spot market above farm gate levels The raw milk market is strengthening, bringing the EUR €50 per 100 kg level gradually back into view. The DCA benchmark for raw milk in southern Germany rises by EUR €3 to EUR €48 per 100 kg. Similar increases are recorded in the Netherlands and northern Germany, where the benchmarks reach EUR €44 and EUR €45 per 100 kg respectively. As a result, spot market values are moving increasingly above the farm gate milk prices paid to dairy farmers.