Global Dairy Trade Auction Analysis - 16 August 2022
Key Takeaways:
? Prices were mixed across products at this auction following weakness across the board at the prior event.
? SMP eked out a gain following recent declines, but Fonterra WMP marked the fifth consecutive drop.
? AMF plummeted while butter showed slight strength. On a fat equivalent basis, AMF is sharply undervalued.
Whole Milk Powder — Prices Across Forward Curve Decline Again, As Expected
? With additional supply on offer, there was not enough demand to spur price increases. Fonterra C2 declined for the fifth consecutive event.
? SGX traders were looking for an $80 or 2.3% decline; the realized $145 or 4.1% drop was just slightly more than expectations.
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Skim Milk Powder — Fonterra C2 Climbs Following Three Consecutive Declines
Near term and deferred Fonterra SMP contracts saw strength at this auction, with the bullish result surprising as SGX traders were expecting a $100 or 2.8% price drop. The stabilization comes following three consecutive auctions of weakness; today’s Fonterra C2 settlement is still DOWN $815 or -19% from the recent peak at the second June auction. It is likely that many buyers are purchasing hand-to-mouth and were waiting for a market bottom to hit before stepping in to procure; the strength in both C1 and C2 indicate immediate needs are heightened.
AMF Plummets as Fonterra C2 Premium Drops Below $5,000/MT
Fonterra C2 Premium AMF dropped sharply, falling below $5,000 per metric ton for the first time since January 2021. The weakness materialized opposite trader expectations that called for no price movement at this auction. While North Asia demand was strong, weaker needs from both the Middle East and Africa contributed to the decline.
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