Another week of summer vacation brings low activity to dairy markets around the world. Uncertainty revolves regarding the debate over gas supplies from Russia, which are used to heat and dry dairy products into powdered commodities. The higher costs bring significant struggles for numerous market participants. The main question is whether demand will increase when citizens return from vacation and whether there will be enough milk and energy to produce dairy products. As we have all heard, the high temperatures and strong winds are causing forest fires across Europe, affecting the well-being of cows. Right now, many buyers seem to be waiting to see what will happen in the upcoming weeks.
In the UK, one in ten farms have been forced to cut production due to staffing issues, and thirteen percent have reduced the size of their milking herds – or expect to do so soon. Arla is calling on ministers to act to save the industry, including relaxing immigration rules for some jobs. In the U.S., people wonder if labor shortages are „the new normal”.
All of this is consistent with the situation on store shelves: Following the growing cost-of-living crisis, all U.K. retailers have significantly raised their prices for private-label products. Consumers are faced with rising milk prices – a carton of two liters of milk now costs the same as a carton of four liters at the beginning of the year. It also looks like British consumers are changing their habits to cope with inflation. Recent data shows that about 30% of consumers are buying less meat.
Continue reading to learn about this week’s market insights.
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Following weeks will show uncertainty in demand regarding SMP, which will also affect in lower demand and offered prices in the market. Still, it does not seem like manufacturers have a surplus of the product available and are forced to decrease their levels drastically in order to push the stock out. We can compare the present market to a game of beginners chess, where the participants await for another’s move to evaluate (with a lot of time taken) the next move.
Similar behavior regards Full Cream Milk Powder, as demand began decreasing due to China not being an active participant in purchases from the EU. Product is available however manufacturers limit the production for uncontracted product that is sought by buyers in July and August.
The United States as well as the European Union have a modest availability of Sweet Whey still visible. The discrepancy between the prices in this commodity are visible, where the United States remains the cheapest alternative in these products outside the EU. The product does not seem to have much demand right now which could be because a smaller consumption and the holiday season.
We have to remember that the product availability via trading parties are limited and therefore purchasers should not be convinced by the prices only of manufacturers.
Prices remain stable for the products in the European market. Looking back at the first quarter of 2022 along with the previous year, we can confidently state that the market for cheese is quite stable. Compared to other dairy products, cheese does not have large fluctuations in price ranges. Therefore, we cannot observe that current global challenges cause any disturbance to stability.
Seasonality shows the lack of butter demand on the current market when compared to the cream prices relatively firming last week on an average peace. Translation for the fresh or chilled product should theoretically increase the spot market basis for fats however prices remained on a slight decrease in the last week.
Due to the weather the price is slightly lower. Although it has to be underlined that cow production is currently weak, which results in differing amounts of product in the various markets.
In certain parts of Southern Europe, producers are buying milk and skim milk concentrate from northern dairy processors to fill the gap in milk supply, affecting the Skimmed Milk Concentrate market.