GDT Sets The (Bearish) Tone

Yesterday the market felt heavier again, especially after the GDT ended. With a negative result of 4.7% the sentiment among our partners turned (more) bearish again. It seems international demand remains low and producers in the EU have to start accepting the fact that their high milk price might produce expensive commodities, they will not sell at higher levels. It's the low-demand side that is dominating the price setting and this low demand will pull the commodity prices further down. 

It's not a popular opinion to write down, but we fear the conservative attitude of most producers will be the cause of a heavy market for the next few weeks/months. We see more and more offers coming to the market for Q2, but with most demand covered we fear these offers won't find a home quickly. Most producers are still focussing on sales in April, and some in May, but the majority of the buyers seem to be covered well into Q3. We think that only those suppliers/traders/end users with the capacity to store products for a longer time and finance it will be in a position to make keep some supply off the market. But with retail the new retail prices we fear producers will be faced much more with liquidity issues.

Looking at the GDT results we see the overall sentiment on all products is bearish. With an overall minus of 4.7% demand from everywhere seems weak. WMP powders set the tone with a minus of  5.2% trading just above $ 3000,-. Demand for AMF was even weaker with a minus of 7.2%. Butter took another smaller hit of 3.3% and is now trading at $4600,-/€4200 equivalent. We expect to see EU butter follow this trend if it wants to offset some of it supply in the world market.  SMP prices traded 2.5% lower and is now trading at $ 2580,. Looking at the result of EU SMP we see the price of $ 2490 / € 2275. Its in line with where we see the physical market, but far from where we see the EU quotations. We wonder if we will see the EU EEX quotations settle closer to the GDT results.

The only positive on the GDT was the cheddar price, but after 2 events in a row of -10% it was expected to see a small bounce. NZ cheddar prices are now trading around € 3800 prices, we expect to see EU cheddar prices closer to this level (or even below) as export orders are expected to be won by NZ at this stage.

We expect the rest of this week to trend in the sentiment of the GDT. Sometimes after the bigger drops in prices on GDT, the first call we get are from buyers asking if cheaper offers are available. Yesterday the first calls came from sellers, asking if the low bids were still valid. Its an early indication of lower trades.

In addition, the EU keeps facing difficulties in export as the USD seems to be getting weaker against the Euro. We are now almost back at the same level we were on a year ago 1.097(at the moment of writing) and eyeing to break the 1.10.