Milk price has not yet reached the ceiling

FrieslandCampina announced this week that the guaranteed price for April will increase by 2 euros to 48.50 euros per 100 kilos. Meanwhile, all odds continue to shoot up. The ceiling is not yet in sight.

Both dairy quotations and milk prices continue to rise. The guaranteed price of FrieslandCampina will again be 2 euros this month and amounts to 48.50 euros per 100 kilos. The price for organic milk is 56.25 euros per 100 kilos. This is 1.25 euros more than in March.

At the same time, dairy quotes continue to rise. At the dairy quotations of ZuivelNL, the price for fresh butter shot through the limit of 700 euros per 100 kilos this week. No less than 35 euros were added, bringing the quotation to 710 euros. Butter thus breaks the old price record from 2017.

According to international policy advisor Klaas Johan Osinga of LTO Nederland, who closely monitors the dairy market, there is an enormous shortage on the fresh butter market, while vegetable oils are not cheap either. The buyer therefore has few alternatives. Osinga: ‘There is therefore a lot of day trading. Due to the uncertainty, little is recorded for the longer term.’

Shortage and Cost

According to dairy analysts, there is a shortage on the one hand, and producers face high production costs on the other. It is therefore assumed that the quotations and prices can continue to rise for a while.

‘I do think that the ceiling for milk prices has not yet been reached,’ says dairy analyst Mathieu Geuskens of A-insights. According to him, the current turmoil in the market is ‘due to an accumulation of factors’. But the war in Ukraine is the most uncertain factor for the market. “It’s just not clear yet in which direction this conflict is heading.”

Geuskens talks about a rapid succession of very far-reaching events, the corona pandemic followed by the war in Ukraine, which are causing the entire system to be confused. “It’s a couple of ‘once-in-a-lifetime experiences’ that we’re going through in a few years now. In addition, in our part of the world, milk production is under pressure due to greening policies and more attention to animal welfare.’

‘These are cost-increasing measures that the dairies must respond to’, says Geuskens. ‘Otherwise, the farmer can no longer manage it. In addition to temporary developments, these are structural issues that the market has to deal with.’

Geuskens sees insufficient success in the chain to absorb the price increases of transport, energy and raw materials. ‘This must also be passed on to the consumer. You have already seen that certain products in the supermarket were temporarily unavailable.’

Cost increases

‘In dairy you also see that the point has been reached that dairy manufacturers can no longer solve the cost increases in the chain,’ he continues. ‘The prices of dairy products, like other products, will rise for consumers.’

The supply of dairy is also limited worldwide. New Zealand produced 8 percent less in February than a year earlier, Germany is at -1.5 percent and the US and the Netherlands also produce less than a year earlier.

Osinga is curious how the Dutch growing season will start. ‘It was very dry in March. Now there will probably be some precipitation, but the temperatures will drop considerably again. But it is clear: for the world market, all eyes are now mainly focused on the developments in Ukraine.’

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