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Milk powder markets march north

The end of 2021 has arrived with colder weather, darker nights, and a storm brewing in the calf milk raw material market.

Firstly, it is important to remember that dairy proteins are traded on the European market – so we must look at milk and cheese markets across Europe, not the UK when evaluating our supply of Raw Materials.

Skimmed milk prices begin to rise 

Skimmed milk pricing follows the supply of liquid milk. Prices began to climb following a reduced liquid milk supply from Spring Calving, along with delayed early grass growth and a hike in feed costs preventing liquid milk supply from making any recovery.

At that time, we were in lockdown and hospitality was closed - supressing cheese production. The price of butter also rose by €1000/t as a result of increased demand. Block butter sales alone increased by 25%! This pulled more liquid milk away from cheese production further impacting the availability of Whey.

Whey prices remained strong 

Heading into the Summer the price of Whey remained strong with continued pressures in the dairy sector keeping a lid on liquid milk production and with that we saw skim price climb further.

Demand for Soya Oil impacted Soya price 

There is more to this story than just the dairy protein chapter, a soar in Soya price took Soya Oil up, increasing the demand and therefore price of both Palm and Coconut oil. While Hydrolysed Wheat Gluten also became hard to source and expensive. Adding to that increases fuel costs and delivery pressure and it really has become the perfect storm.

Liquid milk production drops 10% 

Looking to where we are now, and liquid milk production is reported to be as much as 10% down on this time last year, that’s almost wartime rationing level! And when factoring in the natural increase in demand from population growth the gap between supply and demand is further still.

As a result, Skimmed Milk Price has risen €800/t since July, now sitting at its highest price on record. The Whey market follows a similar trajectory with small increases still piling up week on week. On top of this, vegetable oils and wheat gluten have increased €400/t and €200/t respectively in the past 6 weeks.

Where do we go from here? 

Heading into the new year we are going to see high prices for calf milk replacer, especially those with high inclusion of dairy protein and oil. Looking towards quarter 1 we would like to see this raw material rampage turn for home and it is starting to show some signs of easing with smaller increases reported this week, but they are increasing non the less. For now, we can cross just our fingers for more signs of levelling off before we dare to dream about any downward movement. The days of cheap food (and cheap milk powder) may all be behind us.


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