Weekly Update: Are you looking to find? or looking to discover?
Last week we finally had a normal week again. Most partners are back from their holiday, we had activity on both buyer's?and seller's sides and the brokered volume exceeded our budget for the first time in two months again. We have had countless talks about the market and the expected direction it will take. We have had buyers asking us to confirm their bearish outlook, sellers asking us to confirm their bullish outlook, and traders asking us if we agreed with their views (depending on their position it seems). It doesn't seem that people are looking for new information, but for more of the same information. One of our partners described it perfectly: "Are people searching to confirm what they know, or are they searching to discover new insights"
Confirmation bias, nobody is immune to it, but when you are?in a role as a purchaser, seller, trader or even as a broker, we think you should always be aware of this phenomenon. Because in such a role, you should always keep your eyes open for information that challenges our earlier assumptions. Here at Get Fair Dairy we have also been asking ourselves if we have been keeping our eyes open to see the market as unbias as possible as even we tend to take a view and present it in our updates.?
When we look back at last week we see that producers and sellers have all pointed to the latest data about EU milk collections. The first 6 months of the year show a deficit of 0.8% compared to the year before.?The drought in July and August is adding more concerns to this low milk intake, and if we look at the reported milk intake number on a week-to-week basis it's safe to say that?we have less milk than compared to last year in the EU. Even if milk picks up over the next 6 months, we would have to go up by an average of 2% to see an increase of 2022 compared to last year, this seems very unlikely. But if you want to talk with them about stocks or inflation it seems to be irrelevant to their market view.?
Looking back to the arguments our buyers present, they point toward their lower sales and the expected effect of the current inflation. But trying to find hard information about EU consumption, we have a tough time filling in all the information. We do see fewer sales to buyers who supply the retail, but those who supply food service are reporting steady sales or even better sales compared to last year. Some buyers did point to lower total food consumption in the Netherlands(CBS data)?which shows a real decline in consumption. But with much more fellow Dutchmen going on a holiday to the south of Europe this year we might see a plus in food consumption in Spain, France, and Italy. In all honesty, we haven't found conclusive data yet that proves EU dairy consumption is down compared to last year. We think it is likely, but we have no data to support this bearish claim. And trying to point to this argument buyers shrug their shoulders and say that it has to be down compared to last year)
If we would have hard data on stock levels we would be able to make the best guess about how consumption has been over the last months. Asking warehouses across the Benelux we hear that storage space is hard to find and warehouses are very full. But it is hard to know for sure this is only dairy stock. End users, we work with also claim to be sitting on big stocks, but these are mainly suppliers of retail products so maybe not as representative as we would like. We did find some data on the?vespertool?website. This website provided a lot of dairy-related data and looking at their stock overview we see that butter and cheese stocks both are calculated higher in the EU than last year. SMP stock is still down compared to all previous years.?
And then we have our own data. We look at the amount of buying interest and the amount of selling interest and we try to make a balanced overview. This represents the sentiment of the day best, but not always the long-term direction.?We try to present all bids and offers we think are serious on our updates to create a unbias overview. Lately, we have been receiving more buying-related calls and emails, suggesting that the market has more difficulty finding offers than bids.?
So what to expect for this week? We expect to present more unbias information to you via these updates and paint a balanced picture of the market. In terms of market movement.?We expect the market to show more activity and volume this week, on both buying and selling sides as we expect most buyers and sellers for Q4 to start executing their strategies.?Read along the rest of our market expectations per product group.?
The BUTTER Market: Steady to Bullish!
The butter market moved up a bit compared to last week. For closeby the firming cream market is putting more heat under the market and for Q4 + Q1, it is mainly the lack of sellers pushing buyers to accept higher prices. Looking at the data we have about the stock in the butter market it seems the reported stocks should be ok and higher than the stocks in previous years. However, the production forecast looks to be lower. With less milk expected to go to SMP and Butter production (due to high energy cost, but also due to a better valorization for cheese) it might be that we need the butter stocks to prevent butter prices to break the all-time high price of March this year.?
Butter prices in the US are also rising in the previous weeks making the decline in export to the US unlikely. The stronger US dollar is making exports even more profitable. And as a lot of Irish butter goes to the US and Irish milk is reported to be down on fat content we might see less pressure than expected from Ireland than most expected in the week before.?
We have the following bids
For the rest of the butter market, give us a call.?
The CHEESE Market: Steady but with a shakey outlook:
The cheese market, for us, remains a market that could lift off or plunge into the deep. For the short term (September) we do see buyers and we expect prices to trade above € 5200 for the days to come. But for Q4 we have a hard time finding buyers. Last Friday we traded a small volume of Gouda 48% at € 5130,- and a small volume of Mozzarella at € 5050,-.?
The outlook for cheese production seems to be better than the outlook for butter and SMP. With a much better valorization, we expect the production of cheese to be up v.s. the previous weeks. This combined with the lower energy usage for cheese production we would be surprised to see the market for Gouda and Edam just as tight in Q4 as in August and September.?
Looking at the demand for cheese we keep hearing about lower demand in the export markets. We can confirm selling more products in export boxes or with export labels. It would also explain the fact why we see cheese prices on the CME and GDT losing more than 20% since this year's peak price. Demand outside of the EU for cheese seems to be more price elastic than inside the EU.?
The most bullish factors we see if we listen to the new retail prices in Germany. We hear prices are set well above the current block price for Gouda and Edam that we are trading today. We also hear big end users in the processing industry are confirming higher Q4 and Q1 prices as they have no choice but to confirm volumes for their continuous demand.?
We still have a very thin market for cheese. We start the day with:
The POWDER Market: Top Reached (for now)
The SMP market over the last 2 weeks has been super bullish. With trades as low as € 3350 two weeks ago and as high as € 3750 last Friday it has seen the biggest increase since we started brokering SMP. We did have the feeling Friday that we have reached a temporary top, although the powder market keeps surprising us.?
Friday, ONIL prices and volumes came out and we had to ask four to five different partners if the information we got was correct. Prices for SMP and WMP look to be roughly the same and confirmed between $ 3950 and $ 4000,- CFR with the biggest volume sold by Fonterra (35.000mt!)
On this information, the market rallied with EEX futures reaching € 3850 levels. We also understand CME and SGX levels moved up higher as well. We traded a good volume of SMP Medium and Low Heat between € 3680 and € 3750 over western EU origin. We did however see that at the end of the day buying interest slowed down at these prices, EEX futures traded € 50,- lower and we were receiving more offers.?
At these high prices, it is easier to find sellers than buyers it seems. We start the day with the following.?
Our buyers are looking to buy:
Managing Director at Greenmark Dairy
2 年De waarde van de kaas opbrengst is i.d.d. hoger dan voor SMP/Boter. ( ca. 1.5%) Maar alleen als er van de wei WPC80, WPVC85, of WPI wordt gemaakt. Bij de combinatie Gouda met weipoeder en met ontsuikerde wei ligt de opbrengst beduidend lager. Respectievelijk -2.9% en -2.4%