Analysis Dairy
Battle for cream highlights scarcity in dairy market
The cream prices have been rising for eight weeks now and the market peak is not yet in sight. The liquid dairy market is characterized by scarcity, which has a driving force on prices. The quickly recovering solid dairy products in the form of butter and cheese also contribute.
Many traders are still on vacation, but the positive sentiment does not care about that. Many insiders will probably be surprised when they see the prices after their time-out. The spotmilk benchmark of DCA for Dutch milk is currently at €51.50 per 100 kilograms, setting the trend for the payout prices moving in that direction. Based on the milk valorization, these levels are also acceptable.
Raw material value on the rise
The raw material value of milk has gained significant ground in recent weeks. The main drivers are the rapidly rising butter prices heading towards a new record. Given the extreme scarcity, this seems to be only a matter of time. Occasionally, batches are already being traded above the record level from 2022. The cream prices are also rising and are even slightly overvalued compared to the butter prices. This is because the fresh segment, like butter producers, is also competing for cream these days. This terminology may sound a bit heavy, but it is not exaggerated.
Very scarce cream supply
Insiders indicate that it is difficult to obtain volumes. Producers who normally have surpluses are now trying to buy milk and cream. The DCA cream benchmark rises by €180 this week to €8.675 per ton, the eighth consecutive increase. Historically, the increase is expected to continue for a while. The market often peaks in November, at the low point of European milk supply. This promises something for the coming months, although there is a risk of overestimation. The strong buying interest is also a signal that dairy producers have confidence in the market. They are trying to build up stocks for butter and cheese that are quickly becoming more valuable and are almost non-existent.
Protein side not thath positive
The protein side of the market remains somewhat behind. This is also evident from the DCA benchmark of skimmed milk concentrate, which loses €40 to €2,135 per ton. The market is less favorable for milk powder producers. Due to the decline in Chinese demand, skimmed milk powder stocks in Europe have increased significantly. Skimmed milk concentrate had support from the fresh segment in recent weeks, but that seems to be weakening. Moreover, organizing transport to drive large volumes to countries like Greece or Italy is a challenge.
