Sideways Season

Last week was a difficult week from our side. After being very active in the first 3 months of this year, it seems more and more partners are stepping on the break, keeping their buying and selling activity a lot lower. April last year and the year before we saw a similar trend, so it might have to be a seasonal reason. The supply and demand dynamics are a lot harder to read in the middle of the milk peak, and therefore it seems decisions get postponed until a clear vision is back. 

Looking back at the previous years we saw activity pick back up at the end of May as the EU milk flush is slowing down and the market gets a better view of how the season is going. At the end of May and in June in the previous years, we see activity pick up as most partners need to prepare for the summer period, making sure stocks are in place, and unsold quantities are allocated.

But focussing on the activity we did see last week, it seems we are trending sideways with some upward potential still for fat, and some downward potential for proteins. But on both sides of the market, it seems nobody is convinced and high volatility might be staying away for the next weeks. Although we thrive in high volatile markets, we would think it's healthy for the market to trade sideways.

Butter: Sideways until...

The butter market did not show much movement last week. In the beginning of the week the market jumped up a bit, but activity at the higher levels is low. The market needs end users to confirm the higher prices, but the resistance remains big. Most seem able to postpone for a few extra weeks, hoping for pressure on the market to build. So far that hasn't been the case yet. Irish producers have been very clear, milk intake still is down v.s. last year (some claim up to 12% lower still YtD) and sales on exports are strong. In the US butter prices are high and rising and the demand for Irish brands seems solid as they say.

Denmark seems to be out of the butter market this year, we hear Arla is well behind on production and doesn't expect to be selling much additional volumes. Pressure therefore needs to come from Poland although we haven't seen a lot of sales from Poland lately. Poland needs low cream prices to produce butter, but with the demand for cream strong in recent weeks production seems low.

Most of the butter we see on the trading floor therefore seems to come from Germany and Belgium. Both countries seem to be ok on milk and happy to sell butter at € 5800 - € 5900 levels. Normally however we see a bit more stock building this time of year, but speaking to our producing partners, stock has not been building yet.

The butter problem the market is facing feels too distant. Those in need of butter can still find it if they pay the price. A butter shortage at this time of the year would be almost impossible. But If stocks in the first 6 months of this year won't be built, we will face that shortage in the second half of this year. So far we haven't seen many numbers that indicate a lower consumption, lower export or other lower demand for butter, but the numbers we see do suggest less stock and less production.

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 € 5900 for May / June
• a seller for 6 trucks of NL/DE/BE fresh/frozen at € 6200 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: Sideways but heavier

Although we are far from bearish on cheese, the market does feel a bit heavier compared to the weeks before. With small trades here and there just below € 3800 for Gouda / Edam it seems some pressure is coming. Speaking to our cheese partners it seems they all face the same challenges and it seems nobody is really expecting any major moves in price. Unless butter prices explode we should be facing a very steady sideways market.

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 trucks of Mozzarella for 2nd part of April at € 3450
• Buyer for 6 trucks of Gouda for Q3 at € 3780

Powders: Back down after a correction

The powder market has been acting stronger than than some (or we) would have expected in the previous weeks and most of our partners expect the downward trend to come back. Looking at the US we see the CME prices trade down in a steady line and SMC prices at the end of last week come off again toward € 1600,- and lower.

With little trading activity, we had a bit more time to speak to our partners about their findings and it seems most keep pointing to the slowdown of offtakes by big and small buyers and the low activity from their export partners. Those well connected to chocolate buyers fear a further decline in offtakes now the cacao prices are so high that an impact on the demand side is almost inescapable.

The powder market needs a demand impulse to get some traction on higher prices. It might get one this week after Ramadan ends this Tuesday. We might see buyers back on the market trying to scoop up some cheaper powders. At the moment we we can offer:

• 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