Waiting and Wishing

Yesterday was a typical pre-GDT Monday, with more talks than action. It seems most are waiting for more information from the market to show them what to do, others seem to be more in a "wishing" mode. They are wishing for more demand, wishing for more sellers in Q4 + Q1 and wishing better prices (up or down). But the waiting and wishing strategy is a strategy that makes you dependent, and the first partners start to take back control. 

The butter partners seem to be most convinced that the waiting game is over and we see more sellers coming to the market. And it's not only traders that are anticipating lower market prices, we see and hear that producers are starting to offer products for close by, but also for further out.

Our powder partners are a bit more reluctant as they hope tomorrow GDT might show a better outlook than the buyers are bidding at the moment. SMP futures look to indicate a relatively flat outlook, but WMP prices are expected to trade lower again. A negative GDT might give a firm push to powder prices tomorrow as internal EU demand is non-existing and export demand is either hiding really well or just as bad.

Looking at our cheese partners it seems the buyers start to doubt if prices should be at the level they are at. Producers are convinced prices can not go lower as the production costs are already above the current market price. But as said many times, it's not the cost of production that is making the sales price of a commodity, it's the ratio of supply/demand. So far this ratio has been well balanced. Some of our buyers seem convinced Q3 will have to trade lower (typical buyer view) and for most sellers the market should not trade lower, but most don't see any upside for now (a-typical). This balance would put our view for July cheese prices on a slightly bearish outlook.

GDT Expectations: Slightly Bearish (-2-3%)

Our expectations for this GDT are bearish. We see SMP futures trading flat, but listening to the feedback from our export partners it seems very unlikely demand will be overwhelming. WMP futures point to lower prices and Butter prices do the same. Only AMF prices are expected to go up, but they should as AMF is still trading below the price of butter. Overall we think the impact won't be massive, but it would feed into the more bearish undertone of the world market.