Although the spot milk price rose less strongly this week than last week, the further increase in this price confirms a trend break. For the first time this year, spot milk has been yielding more for several weeks in a row than the factory price.
There is also a chance that this situation will continue for a while.
The valorization of the milk seems to lag behind in the above figure, but that is because the so-called Rohstoffwert, as determined by the Kieler IfE, lags one month behind and is also based on German prices. The current reality is that the valorization of Dutch milk, after deducting costs, exceeds 50 cents, although this is somewhat dependent on the products being made.
Simple Separation most Profitable
The simple separation of milk into cream and skimmed milk concentrate is the most profitable, but this is only possible on a fairly limited scale. However, in the current circumstances, it is a good option because the fresh market demands a lot of cream and - especially in Southern Europe - also concentrate.
Record Jump for Cream
The price for the latter product has been more or less stable for some time, while the cream price has risen significantly in recent months. There was a dip last month, but it picked up again last week, only to rise sharply this week. With a DCA quotation of €8495 per ton, no absolute record has been set yet. There is still about €500 to go for that, but a record level has certainly been reached for this year. And that in a period of the year when it is normally quiet.
With a quotation of €2175, concentrate is much cheaper than cream, but it is still too expensive to make milk powder from it, as it barely brings in €150 more per ton. That is too little to cover the processing costs. However, the fresh market is taking the concentrate very well, especially because the product volumes are not huge.
There is a similar problem with cream. Cream is currently so expensive that it is not worth making butter from it. It can be better sold for the fresh market. This leaves more margin. Somewhere, this is fortunate for the butter market (from the perspective of producers and dairy farmers) because the shortages in the butter market are maintained. It also keeps the risk low that milk fat prices will really collapse.
To change this situation, a much larger supply of cream is first needed. This does not seem to be immediately on the agenda, even though various market parties believe that the current higher cream prices cannot be sustained.
Summer Uptick
It is not very common for the prices of liquid dairy to rise so sharply in the middle of summer. It suggests that there are also good prices in store for later this season, as milk supply does not seem to be increasing much in the coming months. This is a nice prospect for dairy farming, but it is not completely without threats. Outside of Europe, milk fat prices are much lower. On the other hand, milk powder prices seem to be cautiously recovering from the low, while cheese prices are also trending slightly higher.
