Temperature records continue to be broken in the United States: over half the country is in drought, and most of Texas is classified as extreme or exceptional drought. Milk prices for producers are good, but input costs for feed, fuel, and labor continue to rise. Market participants wonder if milk prices will be strong enough to cover the rising cost of milk production for a full-year or even longer. For now, economic losses due to heat stress are estimated at $900 million in the U.S. dairy industry.
As the 1st half of 2022 draws to a close, more and more reports and summaries of dairy exports and imports and their prices are appearing online. The latest comparison of milk prices in Poland was published, and it was no surprise that prices have increased. According to the Central Statistical Office, the milk procurement price in June 2022 was 51.2 percent higher than in June 2021. Compared to May 2022, the milk procurement price was 2.7 percent higher. Many countries are struggling with the same issue. The maker of Alpro and Activia benefited from a 6.8% price increase across its portfolio in the first half of the year. Danone has indicated that further price increases will follow as the company battles input cost inflation.
The current situation presents many companies with whether to pass on increased production costs exclusively to consumers and risk losing many of them, or to try to keep prices at a similar, stable level. This seems to be a good time to plan business strategies, as half of the summer vacations are already behind us.
Continue reading to learn about this week’s market insights.
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Prices for both products have dropped slightly, but we have many inquiries despite the summer vacation. Many of them are coming from outside the EU countries. Some buyers are already thinking about making purchases for the next few months, as the products are favorable for them due to lower prices.
Good availability of the SWP product. The Chinese market is starting to take off with purchases very slowly. There is downward price pressure on whey, but let’s keep in mind the high price of drying products still affects the price levels. We’ve heard that a number of dairies may abandon the drying process due to lack of profitability.
High availability of WPC on the market. We see a trend regarding the market situation for this product during the vacation season, with less interest from buyers. Producers are now under price pressure and traders need to be flexible to find balance between supply and demand.
Overall, cheese availability can be described as satisfactory. We are in another week of stable prices. Quite a few producers expect higher prices in the fall of 2022. A lot of market participants are observing New Zealand, where the milk production season is about to begin.
Recently, we have seen quite a bit of Ukrainian product on the market, which has only led to price pressure on European products. Western Europe is starting to buy again after the last rather quiet weeks. Quite a few large producers have taken advantage of the current cheaper offers and have contracted at least some of the volume they need for the next six months.
European Cream price quotations seem to have slightly fallen again in the previous week, due to good availability of the product on the market. Overall, the situation is quite stable. In the U.S. Cream availability is tightening throughout the country. Output and cream production are decreasing due to seasonally higher temperatures in parts of the West region.
In the United States milk volumes are generally available for dairy processing needs, and where it is scarcer, producers can get some loads delivered from nearby regions. Hot and dry weather affects cow well-being and pushes down farm output and milk components. In the case of Europe, there is no visible problem with the availability of the material, which is reflected in the lower price, but the high cost of the powdering process is still an ongoing issue.