Weekly Update: More Activity Expected

Last week was active on our side, especially in the powder and butter markets. Activity picked up, but prices remained largely unchanged compared to a week earlier. This stability suggests that current price levels are satisfactory for both buyers and sellers. However, conversations with partners indicate that higher volatility might be imminent, with significant action expected in the final weeks before the big summer break.

In the liquid market, there was noticeable selling pressure due to higher-than-expected milk intake and lower-than-normal offtake. This pressure led to lower prices and prompted producers to bring more commodities to the spot market. Particularly in the butter market, more producers offered spot volumes for late June and early July collection. This is the first time this year we've seen producers decide to produce more butter. Although the increasing quantities of butter caused some downward momentum during the week, we saw more buyers entering the market on Friday, driving prices up again.

SMP prices also moved down a bit, although there was more traction from buyers at lower levels. Partners in the powder market have maintained the same strategy for months: buy below €2300, sell above €2400. This strategy seems to be effective. We hear more buyers asking for quotes in Southeast Asia, but competition from the US and NZ is preventing EU products from gaining significant traction.

In the cheese market, the slight increase four weeks ago was the most exciting moment in the first half of this year. Prices are moving sideways, and we expect them to remain within their current range. Producers expect prices to stay where they are or rise slightly. Exports are attractive at current price levels to Taiwan, Korea, and Japan. With a weaker Euro, the last price hike seems to have disappeared. Mozzarella and Gouda prices might increase over the next few weeks.

For this week, we expect the market to stabilize or see slight price increases. The improving weather forecast across Europe should boost demand for fresh products. Additionally, recent spot deals show strong support at lower levels. With less pressure from the spot market on liquids, we expect reduced pressure on spot commodities.

GDT: Can we go higher?

After last week's GDT Pulse, most of our partners expect a lower GDT. Futures indicate a good correction, suggesting a possible turnaround. However, we are not convinced the market will turn bearish. In the SMP/WMP market, we think both might trade higher again. Lower production numbers support tight expectations, and most GDT buyers seem to have no alternative but to purchase something each week. We are not overly bullish but expect an outcome for both SMP and WMP between -1 and +2%.

On the fat side of the market, we expect more upward momentum. Yes, NZ is the most expensive on the world market, but we think the forward curve last time was too steep and should flatten out a bit, raising the price average. December to April production numbers for butter show a 19% decline in December a 3% rise in January, an 11 % decline in February, 13% in March and 22% in April. These fat deficits combined with less production in the EU we have been reporting about make us so bullish on butter. Additionally, prices outside of GDT are trading at even higher levels than in the previous event, suggesting some buyers still need NZ butter. We expect both AMF and butter to trade 2-4% higher. However, since we are already trading above the previous ATH, our expectations might be off.

We are equally bullish on the cheese market. Export demand for cheese seems to be picking up again, and with low offered volumes, a few buyers might push prices higher.

In general, we expect another active week. After some inactive periods, market activity usually compensates elsewhere. With school vacations around the corner, end-users will likely finalize their planning for July and August, leading to higher activity. Some might wait for the GDT for clear direction, but for those who don’t, feel free to contact us!