Bad News for the Farmers

For Farmers 2022 has been a year where they have seen a steady growth of the milk price, reaching peak levels in Q4. But January shows that 2023 will be a completely different year for the farmers. More coops are coming out with their contract milk prices for the new year and all have reduced their price. And looking at the commodity prices we think farmers will have to get used to reduced milk prices. 

Yesterday the market moved again lower on all products. Pressure from liquids in combination with higher stock levels compared to last year caused the commodities we broker to move lower again. It's hard to determine the value of the current commodities in terms of milk price, but we think prices are closer to 40ct than 60ct. Producers need to ask themselves what is the best strategy to manage the current milk intake with the lowered demand.  Because moving down the price 2-3ct per month will take us into the summer to reach levels that reflect the commodity market and will push milk production down a bit. A quick and firm reduction would also send a signal to the farmers to not invest in more milk, but to put the break on production and keep the milk price above their cost price.

If we look at the spot market for liquids we see that spot milk is now trading between €0.38 and € 0.41 in western Europe and we hear cheaper volumes are available from difficult corners of Europe.

With the GDT back to levels seen in 2020 we foresee that without quick action we will see the EU commodity market also back to levels of 2020. This would take cheese back to € 3100. butter toward € 4000 and SMP to € 2200. Today we set a step in that direction again.