Anuga Weekend: Speculating About Demand

This week is an important week for EU dairy as many key participants from the EU dairy market are to be found in the Koelnmesse in Cologne. The Biannual event always leaves its market on in the market, and we expect nothing less from this year. These first days have seemingly gone by without much new insight among our partners. But speaking to our partners who are already there, one subject stands out: "Where is the demand?"

We hope to be walking the floors of the Anuga tomorrow and on Tuesday and our colleague Linda has been meeting up with our partners this weekend as well. It seems the overall consensus is that short-term supply compared to last year is very unlikely to grow, but also unlikely to drop off a cliff in Europe. The long-term trend in EU supply is flat/down and long-term growth is not to be expected with green deal regulations in most western EU countries. Most of the milk production growth will have to come from China, SE Asia, India and South America.

The long-term demand trend also isn't a big debate as well. With a worldwide growing population, the demand for dairy products is undeniably growing, and most of the growth seems to come from the same regions where the supply increase is expected. The "threat" from non-dairy products is not to be underestimated, but in the medium term, it won't impact the S/D balance much.

So the biggest unknown variable remains the short-term demand. Apart from the market for cheeses, we have seen very little spot demand for butter and powders. It seems most of the partners we have spoken to have seen the same. The short-term demand (demand for Q4) seems to be covered for the biggest part, and more than once we here buyers even expect to carry some stocks into the new year if demand from retail/industry/export remains as low. Producers don't seem to be carrying a lot of stock, but the traders seem to be carrying a bit more compared to previous years. These stocks are going to be the handbrake on a potentially bullish market. Because the short-term supply and demand balance might be bearish for commodity prices, the long-term outlook is bullish.

Butter: Sliding lower

The butter market last weeks came down a bit on the slightly more negative cream market and the lack of demand. EEX futures traded lower and we have seen both Q4 and Q1 trades for NL/DE/BE and Irish butter go down a few cents. We expect the markets to keep trending lower with cream prices expected to trade lower and demand for commodities hard to find.

Cheese: Looking for buyers

Similarly, as for butter, we saw prices for cheese slide down last week. We haven't seen a big plunge to lower prices as spot demand in the previous weeks always popped up and most sellers expect to find buyers in the spot market again. Gouda for October is available just below € 3700, mozzarella around € 3450 and cheddar prices at € 3600 or slightly higher.

Powders: Up, but is it sustainable?

Last week we traded well over a 1000mt of powders and every day the price took a small step up. Buyers for feed seemed to be aggressively on the hunt for products pushing up prices. And even though the market seems undeniably firm, we keep hearing a big question mark at the end of every conversation about the sustainability of higher prices. But for now, the prices keep rising. We see offers disappearing again most offers we have are now above € 2500,- apart from some older less easy-to-move products.

Do you want to discuss the market sentiment with us? We will be wandering around in hall 10. Please pull our shirt and invite us for a good conversation. In the next two days, it will be hard to broker business as we will be in meetings most of the day, we therefore don't open the week with bids and offers. On Wednesday we hope to provide our partners again with a market for butter, cheese and powders.