The decline in milk prices is not over. The commodity value of milk continued to fall in April, indicating falling prices in the wholesale dairy sector. The value calculated by the “ife” Institute in Kiel for the month of April is only 36.3 cents per kg. This is another 2.3 cents less than in March and clearly shows where the journey is heading for milk prices.

Although dairy payout prices are falling more slowly, they continue to fall and are expected to have reached the 48 cent-mark in March and move further towards 40 cents in April. The milk market has tipped; the signs are pointing to a storm,” says MEG Milch Board member, Albert Pröpster. “Now that some dairies have drastically reduced payout prices and others have followed their example, the milk market is heading for the next crisis.”

Milk prices of 48 cents would just about cover production costs on a national average, according to MEG Milch Board calculations. But the wide gap with the commodity value of milk shows: Payout prices will continue to fall significantly in both April and May and dairy farmers will have to adjust to this willingly. A look at the most important products shows that butter prices have recently stabilized at a significantly reduced level. By contrast, prices for milk powder continue to fall sharply. Also in April.

However, cheese prices, which are not reflected in the ife commodity value, are currently under the greatest pressure. European wholesale prices for cheese have fallen by over 20% since the beginning of the year. Butter prices have lost just under 20% in the same period, and the loss is also similar for milk powder.

“In the coming weeks, we can continue to expect falling payout prices for dairy farmers. The hope is that consumers will respond to the lower product prices that have already begun to set in,” says Landvolk Vice President, Manfred Tannen.

Spot milk prices drop to 25 cents–too much milk?

Just how strong the price pressure on raw milk currently is, is shown by the prices for spot milk traded between dairies. There, prices fell to just 25.5 cents in early May- a price drop of another 5 to 6 cents from April. The last time spot milk prices were this low was during the milk crisis in 2016 and briefly in 2020.

The reason for the drop in spot milk prices, in addition to the fall in wholesale prices for dairy products, is the strong growth in milk volumes. At the beginning of May, this was 2.6% higher than in the previous year and is a direct consequence of the high milk prices of the previous year. This is also reflected in developments in our neighboring countries, where high milk prices have also led to an expansion of production and also to massive price pressure.

According to MEG Milch Board, the main reason for the distortions is also the increased milk volumes combined with falling demand. “While milk was still a scarce commodity a year ago and quotations for butter, cheese, skim milk powder and whole milk powder rose to record prices, the milk payout price for farmers is now experiencing a rapid downward slide,” says Landvolk Vice President Manfred Tannen.

“That the milk price will fall was foreseeable, given the signs on the world market, into which about 50 percent of our dairy products flow. However, the extent and speed have surprised both dairies and milk producers,” says Manfred Tannen. So far, at least the running costs could still be covered on most farms.

A drop to pre-pandemic levels with average payout prices of 32 cents is not sustainable, Tannen continues. “Because production costs are high and will certainly remain so in large parts in the long term.”

Source: Agrarheute.com