Daily Digest 22nd of February

Yesterday was a GDT day, in combination with a lot of partners in Dubai, the first half of the day there was little action. Those we didn't speak to on Monday we spoke to yesterday, and it is safe to say that the general consensus of Monday could be felt yesterday as well. With the tiny difference that even though everyone seems to agree that commodity prices could trade up or down, 95% of our partners would rather buy something (or hold their sales), than sell it.

This seems to be the case mainly for commodities that have a longer shelf life and are easier to store. Products like butter, SMP, and cheddar could be put in a freezer or warehouse only to be taken out later. Most partners see a clear floor for commodities, but don't see a clear ceiling when we look forward to Q3 + Q4. The more people we speak to, the more common language we hear. For close by anything could happen (most expect slightly lower prices), but long term the trend for dairy prices is up!

With an increasing population leading to increased consumption (to what extent we can argue a lot) and restrained production in the EU, EU milk prices are likely to trend upward again. Nobody seems to argue against this logic. The biggest question does remain, how will the market handle the short-term "oversupply" that most do recognize? Looking at the volatility of the last months some argue that a price correction 25% from here are not to be dismissed, others will argue that the quick correction of the last weeks shows there is a clear floor in the market. Buyers will jump on lower prices when they return, so the chance of them returning is unlikely some say.

The GDT result didn't point the market in a clear direction. SMP and WMP were clearly down, but butter and cheese were up. Overall the result won't be cause for any dramatic change of strategy for both buyers and sellers in the market. It gives arguments to both bulls and bears to argue that their short-term view is correct. In the last years, March GDTs were the ones to watch to set the tone. So hopefully the GDT in two weeks from now will shine a brighter light on the market.