Weekly Dairy Market Update: Week 33
Summer Shake-Up!?
Last week was the first week after a long time we saw some real action on the dairy markets. After almost 4 months of reasonable steady prices, last week?we saw an upward breakout on yellow cheeses and butter. What is behind this sudden change of price? This is usually not just one event, but a combination of things. The hot weather in the south of the EU is having an impact on milk collection and the milk collection in some western EU countries over July hasn't been great either. The price of liquids, like raw milk, skimmed milk concentrate, and cream have been expensive, making it impossible for spot producers to manufacture commodities at market-level prices. If this hot weather will continue for the next weeks, we don't expect the liquid market to cool down anytime soon.?
Cheese: Strong extra demand, but availability will be better.?
Looking at the cheese market we can see that there has been a good and steady demand for cheeses like Gouda, Cheddar and Edam all year. But last week the spot market saw a sudden increase after some slow in july and early august. This resulted in a short-squeeze due to the low volumes available with traders and manufacturers. Talking to those traders and producers, they didn't expect this sudden increase of demand and didn't keep to much stock for it.?It seems that the industry is caught by surprise. Most seem to have anticipated the demand to weaken during the summer holiday period and not expected a demand increase. However, speaking to our contacts with the traders?we don't think they will be surprised again by a sudden demand increase?and so we do not expect a "short squeeze" like this to happen in September. Talking to the manufacturer they indicate they will keep a bit more stock available for last-minute demand in September.?
In general, we expect the cheese market to relax a bit this week, we did see the first signals already at the end of last week. A hectic week is usually followed by some relief. The buyers who were short on cheese seem to be finished buying for the short term and their focus turns to September and Q4. To see our market on cheese, click on the button below.?
Butter: Fat increase, but on a slippery slope
Butter last week was a hectic product. Pushed up by high cream prices, and supported by low liquidity on futures, and added just a whole lot of uncertainty still due to COVID19 we saw some big buyers covering their short positions and closing some demand for further out. This unusual behavior in the mids of august caught a lot of people by surprise. Normally early august is known for its good time to find some cheap spot loads due to the lack of competition on the buyer's side. But none of it was true last week. By the end of the week, we saw butter traded almost € 200,- per mt higher. We have to say that our view on the butter markets remains very uncertain. Butter prices start to near a price level where cream and butter calculate to the same price per fat unit. Due to the high demand for cream it is not uncommon that cream prices in august are above the price of butter. When this demand fades away a correction in Q4 on cream prices could also correct the butter prices again. Q4 is a high-demand season for butter, but looking at stock reports that should not be a real issue.??
Without a further increase in cream prices, we don't expect butter to move another € 200,- per mt in this week. Demand remains slow from some industries, and on the export market we don't expect any increase in demand anytime soon. The € / $ rate isn't developing in a way that will encourage exports and EU butter already is the most expensive fat on the world market. But with the hot weather cream prices will dictate the butter price for the next weeks, so we will be keeping an eye on the weather channel. Also this week GDT could spark some movement, although we value the importance of the GDT a little bit less for butter than for milk powders.
On Friday we finished the day with some interesting offers for the short term, so if you have any interest to buy, please contact us. See our full market via the button below.?
Powders: Stable market without a clear outlook
The powder market last week was very stable. No real price increases or decreases to report. We did notice a switch on sentiment with some stakeholders we speak to. Where last week we started the week with a stable powder market with a firm undertone, we felt the firmness changing in just a stable market without any undertone. Although the market for proteins is not on an all-time high, it is trading on a 5 year high. Last time we saw higher prices was in summer 2014. We notice that not everyone is sure that prices can increase much more from today's prices.??
EU stocks still seem to be low, production of proteins is steady and the demand has been good. But in recent months this demand has slowed down. Fonterra is coming back in its season and seems to be on a slight discount on EU products. The US production is up, and also South America isn't stepping on the break yet. And where the butter market is a very EU-orientated market in terms of supply and demand, for powders we have to look at the world stage. We will be watching the GDT closely and also keep our ears open if we hear the ONIL tender being announced.?
Last Friday we had quite some offers in our marketplace, and we keep having some buying interest for further out. If anything fits your needs, feel free to connect with us! Click on the button to see our marketplace!?