Typical Slow Start of the Year

Yesterday 2024 started off slow. Most conversations had the same three talking points: Christmas, New Year's Eve and best wishes for the new year. All of those we spoke to agree that the year ended firmer than expected, but most of our partners have no real strategy or market outlook for the next weeks. The "let's wait and see" strategy seems generally the most adapted one. The same questions are on the table that we had last year. How good is demand? How bad is supply? And how high are the stocks?

Looking at stocks it seems they are a bit lower than expected. Looking at the age of delivered products for cheese and butter we hear relatively fresh products are being moved. Cheese is still young with 24-28 days on average it will take some time to build stock. On butter, we keep hearing that Irish summer butter is very hard to find and fresh butter production has been running low in the last months. It will take time to build stocks which will cause pressure as well. In addition one of the bigger freeze/cool warehouses in the Netherlands caught fire yesterday causing concerns about the product that is stored there. Apart from vegetables there usually are large stocks of butter and cheese as well. We saw that cheese sellers pulled their offers quickly once the news broke. The effects of the fire will be known in the next few days. It might not be as big of a problem as some think.

Looking at the demand side the GDT is maybe the best indicator. Butter and WMP found more upward potential suggesting the demand for fats is ok. Although cheese didn't look that firm and SMP is showing more weakness. Demand figures from SE Asia are disappointing and a real concern for export demand. But on the other side, EU SMP prices held up well and are trading on a strong premium vs. the US and NZ products.

Most eyes are now turned to the market for liquids. With slowly growing milk volumes and a usually disappointing demand in Q1, we see some speculations of easing prices. The first indication for cream is coming in between € 6100 and € 6250, which should create a bit cheaper butter production possibilities. However, the first week of January is never a really good indicator for prices. Milk production will be the key indicator for market prices it seems. An uplift in production can put immediate pressure on the prices as we see little willingness to cash and carry products for future price speculation. However, a further decline in milk intake could mean nothing less than increasing prices again. Less milk should always lead to higher prices, even with decreased demand.