145th Edition of Foodcom DAIRY Newsletter
The winter is coming and both governments and businesses are fighting to be prepared for the worst. From the current perspective, it seems almost certain that European societies and enterprises will have to deal with both sky-rocketing energy prices and power outages. France urges citizens to carpool and reduce home heating, and private businesses to turn off lighted signs overnight. Major government investments are underway in many countries to ensure energy security in the coming months. Nonetheless, many experts fear that the situation could get out of hand one way or another.
It is clear that both the energy crisis and the increase in milk prices are negatively affecting companies, including bakeries. Some German bakery owners are predicting that their annual electricity charges could quadruple. Rising prices for intermediate products, such as butter and milk, are also significantly increasing production costs. And don’t forget about employees, who expect higher wages to enable them to survive in an era of galloping inflation. Entrepreneurs have no doubt that passing on the increase in production costs to consumers is no longer an option – customers burdened by inflation are less and less likely to reach for products they do not necessarily need.
International milk prices rose while volumes fell in this month’s first Global Dairy Trade auction organized by GDT Events. The GDT Price Index gained 4.9 percent. While the changing landscape of the dairy sector is something we need to be ready for in the months ahead, any fluctuation is necessary to note for an informed business. We’ve heard that due to the high price of dairy products, some contractors have considered purchasing products from exotic sources that may prove to be more attractively priced in the future, even when export costs are taken into account.
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Early fall is the beginning of the candy season. As outside temperatures drop, Skimmed Milk both liquid and concentrate prices rise due to the rising price of milk, which consequently transfers to the price of the powdered product. Production costs are still high – some dairy companies stated that in previous years they were about 2-3% of production costs, now it is more than 20%. This is particularly evident in the powder products.
Producers are holding on to high prices. The reasons are high milk and energy prices. In many parts of Europe, including Poland, there was a dry season in the summer, which also affects the price of Full Cream Milk Powder. In the near future, production costs will likely continue to rise, mainly because more and more animals are fed with fodder instead of grass. At the moment, there are only two alternatives: either demand will decrease or the price will not. The big concern for dairy manufacturers is the current EU policy, according to which a farm with more than 150 cows is considered an industrial farm in terms of pollution, emitting large amounts of CO2.
For WPC 80 Instant, the price remains stable. The peak season for WPC starts right now. During the season, consumption will be higher and production schedules for this product will also be higher. Many buyers are interested in buying large quantities now because they expect the price to rise, but the market is not able to meet all their needs at once.
Cheese prices remain high and the market is stable for now. The cheese season has already started and will continue in the coming months. There is a well-founded fear that prices could go up in the second half of 2022 due to the lack of new production capacity.
Due to the significant increase in the price of Cream in recent weeks, the price of Butter has also increased. As has been shown in recent weeks, the cheap raw material is slowly becoming unattainable. The price of Polish-origin product is one of the lowest on the European market. As for cheap product from Ukraine it seems like it has disappeared from the market for now. In the West, less availability of the product can be observed, with the offered Butter costing from 7 EUR/KGupwards.
The price of Cream increased significantly. This had a direct impact on the other branches of the dairy industry, such as Butter production, and caused the prices of other products to rise as well. The interest in cream remains constantly high though.
Milk supplies in the US are facing challenges as California dairy farmers struggled with unusually high temperatures last week. The high temperatures have led to water shortages, further complicating milk production. As for the European market, energy prices are rising constantly which makes the production of almost anything more expensive. Milk is not an exception in that matter. SMC raw milk prices rose during last week.