IDM | Editorial
It’s a new market situation
Milk fat is no more a problem, but protein is
Roland Sossna
Editor IDM
International Dairy Magazine
sossna@blmedien.de
international-dairy.com
4 · 8 2017 | international-dairy.com
In a somewhat historical view, the markets for milk fat and milk protein have come into a complete
imbalance. The prices quoted for protein are about what they have been a year ago while
the prices for fat have skyrocketed by an unbelievable 150% or so. As it looks like, this tendency
is here to stay for somewhat longer, although there are first indicators in the markets that fat
prices won’t increase much anymore.
Nobody in the industry who has a heart for dairy farmers would say that milk fat prices need an
imminent correction as milk prices have recovered to a much more sustainable level over the past
months. One should remember that a relatively large number of farmers has quit, at least in Europe,
in reaction to the severe market crisis we have seen. This cannot go on without significant
repercussions for processors.
What we see is in fact a totally new market situation. Consumers eat more cheese – the EU exports
are destined to reach an all-time high this year – and cheese absorbs a lot of milk fat. There
are also less alternatives to milk fat available, just look at the long-going negative discussion on
palm oil. Vegetable fats have reached a relative high price level and they are no longer available
in as much quantity as one who wants to save costs would possibly like to source. Butterfat also
benefits from the declining consumption of margarine and, generally speaking, milk fat has now
the image of being the very best nutritional fat on the planet, even in the US. And, breeding has
led to lower amounts of fat in milk.
Therefore one needn’t be preoccupied with the fat side of the market. But the market situation
for protein is worrying. EU stocks above 350,000 tons of SMP have put a heavy burden on the
market and what has once diasappeared into intervention must return sooner or later to the
market. No-one seems to have developed the right means how to cope with the SMP stocks. And
this is likely to stay that way.
It is to hope that the looming correction on the milk fat side will not shake the market in a way
that will produce the next milk market crisis before farmers have recovered from the past one,
thinks Roland Sossna.