Fat Firms the Fundament

Yesterday the market started slowly. After a long easter break it seemed most had their usual Monday morning meetings on Tuesday and the weekly strategy sessions only ended after lunch. At that time the GDT event had started and most decided to wait and see how the results would impact the EU market. As it shows, a bullish fat market is pulling the entire market fundament higher, and we might not be getting back down again. Or are we?

With a headline of 2.8% upward movement, it seems the world market has broken with its bearish trend from March. The fat side of the market is pulling the market as proteins still struggle to get some upward movement. With a plus of 3.1% butter led the way with EU prices still underperforming v.s. NZ product. We would expect the EU butter market to take a few extra steps in the next few days to try and catch up. AMF prices also moved higher with a 2.3% increase. Cheddar prices also impressed by rising 4.1%.

Looking at the powder side of the market we see that WMP also performed much better than the previous events, trading 3.4% higher. Even the SMP market firmed up slightly with a plus of 1.4%. Only lactose and BMP didn't perform well with minuses of 3.1% and 0.5%.

In general, we think the GDT showed a better-than-expected result. It falls in line with the slightly better result on the ONIL tender and the better demand we see in general in the EU market. We would not call it a wild and bullish market (yet) for all products, but we do see a shift in the amount of buyers for most products, although most of the buying interests seems to come from butter buyers.

Bullish Butter

Speaking about that butter market it seems we are entering a real bullish sentiment again. Cream prices are on the rise again with prices mentioned as high at € 6850 yesterday for next week. The cheap cream that some buyers hoped for after easter, for now, seems to be a myth once again. It seems the market is facing a lot more buyers and sellers are hard to find. With a part of the traders still short, and very few traders long, the eyes of the market have turned to the producers who all claim to be low on stock and well over their sales target that they had set in an earlier stage.

This resulted in higher butter trades with Q2 trading as high as € 5950 and Q3 as high as € 6100 for NL/DE/BE. Offers are no longer available at these levels and bids are starting to come in. Those who still think Q2 prices should drop due to supply will have to face reality and accept the fact that Q2 prices usually rise due to increased demand.

We start the day with

• a seller for 6 loads in Q2 at € 5975 for NL/DE/BE fresh/frozen
• a seller for 4 loads for May / June at € 6000 for NL/DE/BE fresh/frozen
• a seller for 6 loads in Q3 at € 6300 for NL/DE/BE fresh/frozen

Cheese Aims Low, but it might shoot high

Looking at the cheese market we still see that most of our buyers are aiming to buy at lower prices. The expectations that cheese production should increase over the better valorization still makes sense, but with fat prices rising and SMP prices showing a slight correction the valorization gap is closing. So instead of butter and SMP pulling the cheese price down, we might see that downward pressure get lighter.

Also, the upward trend on the GDT might take a bit of pressure off the market. Cheddar prices worldwide have been under pressure a lot, but lately, the EU trend is reversing a bit. In the US we haven't seen a reversal just yet and cheddar prices keep trending lower.

Yesterday we had the following market

• a buyer for 4 loads of NL/DE Gouda for May/June at € 3750
• a buyer for 6 loads of NL/DE Gouda for Q3 at € 3800
• a buyer for 1 load of NL/DE Gouda for next week at € 3740
• a buyer for 1 load of NL/DE Edam for next week at € 3740
• a buyer for 1 load of DE Mozzarella for the second part of April at € 3450

Powders Proof Resilliant

The powder prices prove more resilient than we would have expected a few weeks ago. With the ONIL tender closing higher than expected and now the GDT closing higher than most expected we see more buyers and sellers taking a clear step back. But as said we are not sure prices will trade up from here. With prices for cream trending clearly higher and raw milk prices still stable well below 40ct, smc prices at € 1400 should still be attractive enough.

It seems future prices are trending slightly higher so a slight increase in prices could be very well possible. We however doubt if it's a reversal or a correction. Most of the offers we had got pulled so we started the day with bids as follows

• 300mt of SMP codex Solarec/Rucker/F+S for Q2 at € 2250
• 300mt of SMP non-standerdized for April at € 2250 with 35% protein

Summerizing, the market feels a bit firmer over all products, although it feels a bit stronger for butter, and a bit less strong for proteins. But we might see the market trade up in the next weeks as demand is outperforming expectations in some categories, and supply isn't as overwhelming as some expected.