Getting Ready for the Plunge

Nicer weather is on its way, and we can almost smell the summer coming. Summer for us means eating outside, cooking on the BBQ, whipping icecream from our children's faces and cooling down in the swimming pool after a long day of hard working. But those who have seen us enter a cold pool might recognize the phases we go through when we enter. From the toes to the knees, it is simple and we go in fast. But getting in deeper water from the knees to our waist, our pace slows down. Our body needs to adjust to the temperature. From the waist to the chest takes for ages, we dip down a bit, and splash water on our arms, only to postpone getting in deeper. And finally, when we have found all the courage we have, we plunge in, accept the cold water and even embrace it! These phases are not so different from the phases our partners who still need to buy go through. 

Getting used to higher prices is not so different from getting used to cold water. The first increase the market showed to the buyers got accepted quite easily. Every buyer knows commodity prices go up and down, so paying a bit more every now and then is ok. But for some commodities (butter, gouda, mozzarella) prices are going up above the acceptable levels. Butter buyers have followed while prices went up and they are now (to keep using the analogy) into their waist. But the market now needs them to go in deeper. Even higher prices are now offered and most buyers do not want to dive in deeper as these prices are very uncomfortable to accept. But to get to the other side of the market, it seems inevitable that buyers need to dive in, get used to the new prices, and start swimming to the other side of the market.

Ok, for those we lost in the analogy, let's put it simply. We see a market that is stabilizing a bit, not because more offers come to the market, or because prices start to come off a bit. The reason prices are stable is because buyers are not following. Buyers need to get used to the higher prices, and that usually takes a few weeks. We feel the market might hover a bit around the prices of today for all commodities, but we should see a continuation of the bull run in the days ahead.

Liquids: Lingering around last week's levels

Looking at the liquid market we roughly see the same. So far it is hard to find buyers at higher levels, but offered prices are not coming down. Cream prices are reported between € 7700 and € 7900 Although it feels we still have plenty of buyers, the cream availability is low. A Thursday rally would not be strange to see. SMC and raw milk prices also show some stable trends although we understand from befriended traders the market volumes are down compared to last week.

Butter: Getting Stuck

The butter market remains quite active. Yesterday we traded some significant volumes for June around € 6650 and Q3 between € 6775 and € 6800. Q4 bids did not go up, but with offers at € 6825,- we feel the market should trade at these levels once buyers have accepted the new market reality. Low availability for Irish, Danish, NL/DE/BE butter for May/June is causing some sellers to postpone deliveries from May into June or even July. As said before, these delays in the market just after the milk peak are a clear red flag for us, for what is about to happen in the second half of this year. We have offers for

• 6 loads of NL/DE/BE for Q3 at € 6800
• 6 loads of NL/DE/BE for Q4 at € 6825,-
• 4 loads of Polish Sweet Cream butter for June at € 6500

Cheese: Waiting for the end of PLMA

With a lot of cheese partners stuck at the PLMA we did not see too many trades for cheese. We did see some offers but for cheese most buyers have not got used to the new market levels. With Gouda offers at € 4200 and Mozzarella just below € 4100 for June/July the market has taken a 10-15% step in three weeks. So a slowdown in activity might not be that unhealthy. We start the day with

• 4 loads NL/DE Gouda July/August at € 4200
• 1 load of German Mozzarella for June at € 4100

Powders: Prices Easing

We haven't seen a lot of activity on the powder market so it is hard to update on this. What we do see is that futures are coming down a bit, and we hear SMP FEED prices are dropping as well. Where demand for fat is strong, demand for protein is weak. And although we haven't seen much lower prices yet, its hard to see sellers staying at their € 2450-€2500 levels. The pressure of the protein market seems. heavier than thought. Where for butter and cheese the buyers are on the edge of going under, in the powder market buyers are running back to their towels, ready to enjoy some sunshine and wait for better prices. We do have a buyer for

• 300mt Solarec Medium Heat for Q3 at € 2475
• 300mt Solarec Medium Heat for Q4 at € 2525