Ajax v.s Feyenoord, A Dairy Analogy

Yesterday was a very inactive day from our side. The market didn't show any trades we could broker and it feels like most of our partners are without the energy to engage in this market. It reminded us a bit of a football match we watched this Sunday, Feyenoord v.s. Ajax. The two clubs have a long history of friendly (and unfriendly) rivalry. Ajax in recent years was at the top of the Dutch League and even in Europe, they were fighting with big names like Barcelona, Arsenal, PSG, Bayern and Milan. But since a few months, the club fell into a negative spiral leading to an embarrassing 6 - 0 defeat v.s. their biggest competitor Feyenoord this weekend! (Get Fair Dairy Cheering!)

So why does Ajax remind us of the current dairy market so much? It might not be applying to of all our partners, but it feels like most of our partners are experiencing a bit of a drought in terms of success. We know that most traders and end users we work with had record years in the last 2-3 years, breaking turnover and profit margin records. But this year it feels the numbers so far are looking a bit less positive. Margins and volumes at the big traders are not growing as much as in recent years. And from big end users who supply retail and food service, we understand competition is stronger and margins are back under pressure. This is due to increased internal costs and higher-than-expected commodity costs. So where most budgets for 2024 have grown v.s. 2023, the reality for the majority of traders and end users is that most are behind on target.

These disappointing numbers do something with the mindset of those responsible for market engagement. Last year we noticed that the confidence among most traders and purchase managers was at its peak. All the decisions that were made turned into gold and profit margins went up. We saw traders opening and closing new positions weekly as their track record was mainly positive. The market conditions were perfect as some predictability of the market direction most position managers secured the majority of their commodities at relative lows, making them the start of the company. To put it into the football analogy, our partners were goal-getters, scoring goals from every angle with the most beautiful shots. And on the sidelines, their colleagues were cheering and applauding their show. And those who love football know that a striker who has gotten the right flow, keeps shooting and scoring from the most difficult angles and most impossible positions.

But just as it is in football, people can get out of shape. And since the end of last year, and the start of this year it seems our partners have made some misses in reading the market. We have to admit we find the market hard to read as well with data coming slowly to the market and bullish and bearish news following quickly. Our strikers kept shooting at the keeper, but less secure and with less power leading to more misses and fewer goals, and therefore their confidence faded. Our strikers are becoming less confident and even shot before open goals are passed to a teammate who also passes the ball along. Their colleagues aren't cheering on the sidelines anymore as their inability to score leads to pressure inside of the the rest of the team as well. And just like Ajax lost its form, the trading teams and purchasing departments aren't winning 9-10 matches anymore, but they keep spilling points, losing confidence and even a bit of control of the game.

So looking at the dairy market, we see the Ajax of 2024, chaotic, looking for direction and a leader to show them the way. The market lacks confidence and therefore our partners decide to pass the ball along and not make any decisions. This seems to be leading to traders keeping very small positions and end users seem to be buying hand to mouth, accepting higher than accepted market levels, hoping for lower levels in the months to follow.

Does the market has a Feyenoord Team?

Looking at the producers, we see a much more confident and balanced team. Their decisions in the last 9 months all added up to better results. They didn't cave when butter prices dropped and they kept their market outlook firm firm. Their defense seems unbreakable and they have good results to show. On cheese they managed to keep prices steady and by keeping the market clean, they are not put under pressure to kick the ball forward and hope for the best. You could say that only on SMP they needed to let some lower trades go, but even their producers seem to be outperforming their trading partners on the other side of the table.

Is it all hopeless for our "Ajax" partners from here? We don't think so. We all know it takes only a few good games/trades for confidence to return. And as a Feyenoord fan we can speak from experience the chance that confidence turns into arrogance lies around the corner. But for now, the ball is on the side of producers and they determine the pace of the game. If they play it well this season their winning streak should continue.

So, how does the market still look like from here?

Butter: Stable

We still see the same bids and the same offers we had yesterday. It feels the market price will be set by Cream this week, so we need to be watching the Cream development. Judging from the trend of the last weeks, we would expect the market to trade higher. On butter, the majority of the activity we normally have comes from traders. We see most of the partners we work with on the sideline. We hope they will be well rested to engage the market soon again. We start the week with:

We start the week with:

• a seller for 3 trucks of NL/DE/BE fresh/frozen at € 5950 for Q2
• a seller for 6 trucks of Irish lactic, fresh/frozen at € 5875 for May / June
• a seller for 6 trucks of NL/DE/BE fresh/frozen at € 6100 for Q3

we have buyers for

• a buyer for 3 trucks of NL/DE/BE fresh/frozen at € 5800 for Q2
• a buyer for 6 trucks of Irish lactic, fresh/frozen at € 5800 for May / June
• a buyer  for 6 trucks of NL/DE/BE fresh/frozen at € 6000 for Q3

Cheese: Stable

On cheese, we see no activity. Bids and offers hardly move and we expect the market to open similarly to yesterday. Speaking to producers they play a very defensive game. They are keeping the market tight and we see no aged volumes. With cheese production running full-time in recent months, we could not think of any reason why prices would drop.

We would still expect to have the following:

• Seller for 4 trucks of Gouda April at € 3840
• Seller for 6 trucks of Gouda May - June at € 3800
• Seller for 6 trucks of Gouda July-Agust at € 3850

We would have a buyer for

• Buyer for 1 truck of Mozzarella for the 2nd part of April at € 3450
• A buyer for 6 trucks of Gouda for Q3 at € 3780

Powders: Sideways

For powders, the market also shows a sideways movement. Most of our partners, both traders and producers, all feel tired. They have been trying to read the market for months, but it seems most can't produce more outlook than they expect sideways action for close by. SMC prices traded at € 1600,- but even with SMC prices up to € 1800 we would not expect a big move on SMP prices. We would expect a continuation of the sideways trend.

We start the way with:

• 200mt  of Solarec SMP codex for April at € 2375 October or fresher
• 200mt of Irish SMP codex for April at € 2330 FCA Ireland
• 75mt or Eastern EU BMP at € 2125 FCA Poland