An unprecedented price rally can currently be observed on the milk market, which is slowly being reflected at the supermarket checkout.
According to calculations by the European Commission, milk producers in Germany received 43 cents for a liter of raw milk in February of this year – that is over 8 cents more than a year ago.
Jessica von Blazekovic
Editor in Business.
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The picture on the futures market in Leipzig is even more impressive, where skimmed milk powder, which is particularly popular in Asia, is traded internationally.
The market milk value calculated by the IFE Institute for Food Economics in Kiel was 67.3 cents per kilogram for contracts in April on Wednesday.
This is the highest price since records began.
“The milk price is currently in a range that is historically unique.
But this is not the end of the price rally,” says agricultural economist Holger Thiele, who conducts research at Kiel University of Applied Sciences and the IFE.
Despite the jump in prices, global demand is unabated, with global supply being scarce at the same time.
Weather conditions and increased costs for fertiliser, feed and energy therefore ensure that less milk is brought onto the market overall.
The high energy prices also made the already very energy-intensive processing of the milk more expensive.
The war in Ukraine made the situation even worse.
Good news for dairy farmers?
The higher prices for raw milk are basically good news for dairy farmers in Germany.
You have been insisting on a higher milk price for years, 40 cents per liter was always the wishful thinking.
The situation was completely different two years ago, when demand for dairy products from major customers collapsed as a result of the Corona crisis.
At that time, people were feverishly looking for ways to reduce the amount of milk.
Now the dairies are scrambling for the “white gold”.
For example, the Jäger dairy in Haag, Upper Bavaria, pays its milk suppliers 2 cents extra for each additional liter of milk they supply compared to the previous year.
However, the rise in milk prices is offset by the rise in input costs.
Dairy farmers are complaining that the magic threshold of 40 cents that was already in circulation in 2006 has long been outdated.
In addition, the prices paid to the producers are rising much more slowly than the prices that dairies receive for their milk products on the market.
This is shown by the raw material value of milk, also calculated by the IFE from market prices for butter and skimmed milk powder.
In February, at 56.3 cents per kilogram, this was more than 70 percent higher than the previous year's price.
In the same period, producer prices increased by only 25 percent.
Only a small fraction of the milk produced in Germany is processed into milk powder, the price of which quickly adjusts thanks to short-term supply contracts.
Rather, the milk from German cows ends up in products such as cheese, for which there are usually long-term supply contracts and thus rigid prices with retailers.
Further price increases possible
So far, the price rally on the milk market has only been reflected to a limited extent in the supermarkets.
Agricultural economist Thiele points out that prices agreed last year were often still at a low level.
However, the purchase prices for the food retail trade increased continuously.
"I expect massive price increases for milk and dairy products." The discounter Aldi, which is currently increasing the prices of numerous products, took the first step.
There, a liter of long-life whole milk in the lowest price range now costs 88 cents, which is 9 cents more than in 2021.
Experience has shown that the competition is following suit, but at the Jäger dairy in Haag, for example, it is said that the trade is still “very stubborn”.
But the balance of power has shifted: Farmers and dairies can choose their customers in the current situation.
It is "no problem" to place the milk on the world market in the form of butter or powder instead of in retail stores - it's just that "the managers haven't gotten it yet".