Milk supply in the European Union continued to decline at the beginning of the year. At the same time, prices of milk and milk products are rising all over the world. According to Rabobank, milk farmers in Europe can therefore expect an increase in milk prices. At least for now, because delivery volumes will also increase in the second half of the year. And demand must keep up.
Better margins and higher milk prices are expected
Rabobank predicts that milk production will become more profitable in the first half of 2024. After margins were in some cases weak or negative at the end of 2023, the first dairies have increased milk prices in recent months. EU producer prices are expected to continue to rise. Given the higher fat and protein content, the 50-cent price comes back into focus. Rabobank currently expects the average milk price in Europe to be 47.5 cents/kg.
Milk supplies continue to decline
In the fourth quarter of 2023, milk supply in the EU and the UK fell more than expected: producers delivered 1.7%. less milk. The reason was wet weather and deteriorating margins. At the end of the year, the dairy herd in producing countries also declined slightly more sharply (-1.5% than the average in recent years (-1.2%).
The lower amount of milk had a particular impact on the production of skimmed milk powder (-8.1%) and butter (-2.1%). However, the production of cheese (+1.3%) and whey increased.
In 2024, milk volume is expected to decline further by 0.6% in the first quarter and by 0.3% in the second quarter. Rabobank assumes that the milk supply will increase in the second half of the year.
World market conditions support European milk exports
The EU and the UK have received support from recent market and geopolitical developments, particularly regarding milk exports to (North) Africa and the Middle East. Due to higher milk prices on the world market and the weak euro against the US dollar, EU milk exports have become more competitive. However, there appears to be little scope for increasing export volumes in the future due to limited milk availability and rising milk prices in the EU.
Milk prices remain stable, but the market is under tension
Milk prices in the EU have remained stable since mid-November, following previous sharp fluctuations. Prices of whole milk powder (-1.4%) and whey powder (+1.0%) remain almost unchanged, while prices of skimmed milk are falling (-5.1%). The cheese market presents a mixed picture. Depending on the variety, spot prices of cheese increase (Gouda +4.5%) or decrease (-6% of the price of Gouda foil cheese). This already shows that the volume of milk deliveries is growing seasonally again, although it is below the level of the previous year.
Overall, the EU milk market is tight, Rabobank reports. Less is produced and export volumes of butter and skimmed milk powder are increasing. Low inventories result in less sales pressure among manufacturers.
However, there are also buyers who need to secure their demand at short notice, for example for Easter. Other buyers fear further price increases due to limited availability and recovering demand.
– .
