Liquids are Leading

Yesterday the market overall traded a good bit lower, with liquid prices leading the way. But while prices of some liquids feel really heavy, commodity prices adjusted to the downside, but not as dramatic as some expected. At lower level there is some support from buyers but also a lot of resistance from suppliers. The question is how long the bottom prices can act as a floor. 

The weakest of the liquids yesterday was the SMC, with average prices of about € 1400,- prices continue to trade downward. We even have heard some deals for € 1300-€1350,-. Those who can take these loads to drying towers now have a very interesting business model for making SMP from SMC.

Raw milk seems to be available a little under 30ct per litre prompting the question of why producers are selling this. It seems cheese and butter and smp still valorize better than selling raw milk. If it's a capacity problem, we fear what will happen in Q2 when we hit peak milk.

Cream prices are the slowest to decline. With prices between € 4900 and € 5100 it is trading lower each day, but the pace of the drop seems calm. We have seen more aggressive drops. With easter around the corner, some think that easter demand is going to turn cream prices back up, while others keep a more bearish outlook thinking most purchases are already done.

It is interesting to see that the lower liquid prices are pulling on the market, but producers aren't dropping their sales prices yet. We wonder why they wouldn't turn a bit more cream, raw milk and smc into commodities. It seems processing cream at € 4900 into butter gives a much better return as we see buyers between € 4400-4650. Raw milk at 30ct isn't giving the same return as making Gouda and Whey and, SMC at € 1400 is giving a much lower return than SMP at € 2400-2500 levels. At this point in time, the market can still absorb the additional spot milk, the question is how the market will handle the extra quantities during the flush. Will they also be sold on the spot market? Or will the commodity production run at is max capacity?