In Ballance for the Break!

Last week we had an interesting week in the dairy market with, again, significant activity, but without a significant change in prices. Most of the trades we brokered were at  (or very close to) the price levels of the previous week. The EU is now past the expected French milk peak and the milk peak in NL/Germany is around the corner. So far the dairy market has been coping well with the additional milk. This week we even saw a slight recovery in the spot liquid prices. Meanwhile, the weather forecast in the EU is improving slowly and it seems the demand for fresh products and the food service industry is improving slowly with it. The spot market for almost every product feels very balanced and the need for sellers and buyers to think about Q3/Q4 seems equally low on both sides.

So with a balanced market and without much pressure to make decisions, it seems our partners are ready for a break. In the next 2 weeks, we expect to see lower activity as most of our partners have plenty of bank holidays, and bridge days, in combination with school breaks. We will therefore be traveling ourselves in the next two weeks with no possibility to write updates. Our colleague Linda will be available to broker deals and inform our partners where possible about the changing dynamics if they occur.

Liquids: More milk and more buyers

On the liquid market last week we saw that more buying interest from Italy and Greece acted a a support for the raw milk and the smc. Steady demand for butter meanwhile kept the cream market from sliding further down. We would expect the market to trade sideways as we expect the milk intake to increase further in Germany and Poland, but it should be offset by slowly increased demand for fresh products. Our expectation for the next two weeks is that liquid price will trade rangebound; cream between € 6400 and € 6700, smc prices between € 1200 and € 1500 and raw milk prices between 36 and 40ct (DAP NL).

Butter: Q2 in Ballance, H2 no action

The market for Q2 showed some lively activity last week. With most volume trading between € 5775 and € 5875, the market feels very stable. Most offers for NL/DE/BE at lower prices however did not seem to come from producers, but mainly from traders rotating their NL/DE/BE butter as they bought cheaper Polish butter. But with cream prices firming and polish producers not able to offer much more volumes, this option dried up towards the end of the week. With such a balanced market in Q2 we can't help but wonder if the current balance won't lead to a shortage in H2. We see similar concerns from analyst we follow in the US, and the last few GDTs show us that international demand for fats is solid. We don't expect a firm butter rally in the next weeks and would expect more sideways trading before action for Q3 starts putting more upward pressure on Q3 prices.

We start our week with

• an offer for 6 loads NL/DE/BE fresh/frozen butter for Q3 at € 6050
• an offer for 6 loads NL/DE/BE fresh/frozen butter for May/June at € 5900
• an offer for 4 loads of Irish butter for June at € 5900 fca Ireland
• an offer for 2 loads of frozen Portugues butter fca south EU at € 5850 for May

Cheese: Food Service to Pull the market

One of our partners said it, the cheese market works perfectly for producers and end users, it is just not a market for traders. Where traders require volatility and uncertainty to add value, they have a smaller role to play in a balanced and predictable market. The predictability of the cheese market remains the biggest concern for them. But speaking to producers we see that most are very happy with the flat market. They have been able to pay a steady milk price to their farmers (especially those who focus on mainly cheese production) and their planning has been relatively easy. And speaking to those who supply retail and food service are also content as its easier to give a price and there is little negotiation as most feel the market is steady and prices of the last time suit both perfectly.

But as said last week, it does feel that pressure is mounting a bit on the cheese market. We see more sellers and more volume, the only thing we don't see yet is lower prices. It seems most sellers do still expect more demand from the food service industry. The last week hasn't been favourable for food service, but the next weeks might boost demand as the weather improves.

For June and July it also seems more demand is expected as we will have the European Football Championship 2024 in Germany and the Olympics in France, attracting more tourism compared to previous years. Somehow looking at athletes pushing themselves to the limit is most fun to watch with a pizza on the couch.

We would expect cheese offers to start at:

• Gouda for May at € 3830 and June at € 3850
• Gouda for Q3 at € 3900
• Mozzarella for May - June at € 3550
• Mozzarella for Q3 at € 3750
• Emmantal Grating for May at € 4500
• Cheddar curd May/June at € 4000

Powders: Heavy but with support

The powder market remains heavy. We did see futures trade lower over EEX and CME and we hear producers are selling lower compared to the previous weeks. We also brokered some cheaper deals on export and cheaper deals for June/July at the beginning of the week. But as the week progressed we did see some higher bids appear for more specific brands with Germany product trading at € 2325-€2340 for June and Solarec product trading at € 2400 for Q3.

We can't help but think that as we trade lower and lower more worldwide buyers realize that there is little risk in buying at this week's offered levels, creating good support. It does also show us that while it seems pressure is taken off the market buy these buyers, there is an even greater risk that these buyers will disappear again after they purchased their goods, and supply will diminish again if prices surge.

The more we speak to partners about the worldwide market for SMP, the more convinced we are that prices will trade rangebound for a long time, putting the EU milk prices for SMP roughly between € 2200 and € 2400. We would expect the next two week to be testing the low side of this range a few more times. Maybe the GDT next week will be a turning point as we would expect to see a bit more buyers there.

We start the week with

• a bid for 450mt of Solarec SMP Medium heat Q3 at € 2375
• a bid for 450mt of Solarec SMP medium heat Q4 at € 2500
• a bid for 300mt BC spec for Q3 at € 2300
• a bid for 300mt BC spec for Q4 at € 2350
• a bid for 100mt of Nestle spec for May at € 2150 FCA PL