ONIL Firms the Sentiments

Yesterday, we observed a typical Monday characterized by a lot of discussions and little transactions. It appears that many are still uncertain about the market direction, although some indicators suggest a more bullish sentiment. Particularly, the butter market seems poised for an upward movement, while the powder market is experiencing a slight uptick following the expected ONIL announcement. However, for both commodities, it appears that most of our partners are seeking answers in the liquid market.

The ONIL announcement typically generates upward momentum. Offers are withdrawn, hesitant buyers scramble for the remaining available offers, and EEX futures see a modest increase. The question remains whether the EU will secure significant volumes in this tender. It's likely that WMP will be purchased outside of the EU due to our lack of competitiveness, and SMP prices will need to compete with the global market. Since shipments are scheduled for June to September arrivals, lead time won't be a concern in this tender. We're sceptical about whether this slightly bullish sentiment will persist if SMC prices decrease again this week. We anticipate finding the answer in the next two days. It wouldn't be surprising if, once the tender closes and liquid prices start trending downward again, cheaper offers reappear in the market.

Turning to the powder market, we anticipate more bids than offers initially. We have buyers for

• 200mt SMP non-standerdized (west EU) at € 2350 DAP NL indication
• 200mt SMP non-standardised (could be Baltics) € 2200 DAP NL indication
• 400mt SMP FR/DE/BE fresh codex with export docs for May-June
• 300mt Irish codex for April at € 2100 (could be older)

Analyzing the butter market reveals a prevailing bullish sentiment. Trades for Q3 in NL/DE/BE are hovering around €5850, with Q4 nearing €5900, approaching the €6000 mark once again. Our partners, however, display a significant split in their market outlook.

Approximately half of them express bullishness, expecting prices to exceed €6000, (or even € 7000) especially in the latter half of the year. Yet, they exhibit reluctance to actively participate due to concerns that prices may dip in the next two months due to milk flush pressure.

Conversely, the other half holds a bearish perspective. They point to rapidly increasing milk volumes, favorable weather conditions, and already low spot milk prices, anticipating a bearish Q2 with considerable price pressure. These partners foresee Polish and Irish producers facing heightened pressure in the coming weeks, possibly driving prices down towards €5000, if not lower. Despite this outlook, they too are hesitant to engage, fearing that prices might rise after the flush. Many opt to adopt a wait-and-see approach, wary of calling the market bottom too late.

In essence, most partners agree on the anticipation of pressure in the coming months, as well as an upward momentum in the latter part of the year. However, their differing views on the speed of market turnaround, the depth of initial price declines, and the eventual peak prices create divergence.

Short-term sentiment will likely be influenced by cream prices in the coming weeks. Despite today's prices seeming steep, there's a sense that cream prices may not experience significant pressure. Therefore, current prices might appear costly now but could prove to be a bargain in a few weeks' time.

We start the day with only one offer:

• 8 trucks of Irish lactic butter for May/June fca Ireland at € 5650

Regarding the cheese market, to be concise, the situation remains unchanged. Buyers dominate, yet their bid levels are insufficient to entice sellers. Many sellers refrain from participation, citing no available stock, lack of sales pressure, and no incentive to sell below current spot market rates. Encouraging seller activity is crucial for market engagement. However, with bids mirroring yesterday's figures, we anticipate the cheese market to continue trading sideways with little to no action from our side

We start the day with bids for

• Gouda Slicing for Q2 at € 3750 and at € 3800 for Q3
• Edam Slicing for Q2 at € 3700 and at € 3750 for Q3
• Mozzarella for Q3 at € 3550
• Cheddar curd for Q2+Q3 at € 3950