More Pressure, More Trades

Yesterday we saw that the activity came back to the market again. We see more sellers and fortunately, our buyers didn't step out so we had an active day with over 900mt of commodities changing owners. It seems more producers are willing to sell a bit of stock and are willing to drop the price a bit. But we still only see sales for closeby from producers, activity for further out remains between traders and end users. 

We also got some feedback from a supplier that our market report was a bit one-sided yesterday. We welcome feedback and we agree that yesterday we focussed on the decline of commodities outside of the dairy market, but we didn't include the decline the dairy market has already seen. So we would like to include the feedback from our partner. Looking at the dairy commodities we see the following:

Dairy commodities have dropped in a similar manner following the same trend as Agricultural and food commodities

The SMP EEX April 22 contract settled at €4,163 on 22^nd March 2022, yesterday's settlement was at €2,512, YOY this is a drop of 39.6%, which is in line with wheat and palm oil for example. Butter EEX April 22 contract settled at €7,025 on 22^nd March 2022, yesterday the butter future settled at €4,727, YOY this is a drop of 32.7%

Looking at the market today, our argument remains the same. We see that prices of commodities like Palm Oil and Wheat are trading at the same levels they did in spring 2021. But looking at the dairy market, we still see higher prices. Butter is still trading roughly € 800,- to € 1000,- higher compared with spring 2021 prices. Gouda and Edam cheese is trading roughly € 300,- and cheddar even roughly € 800,-.  lower. Looking at the SMP prices, this commodity is roughly € 300 above spring 2021 levels. All dairy commodities still trade with a 10-20% premium against levels of two years ago, while milk collection is roughly the same, exports are down, stocks are higher, demand in Europe is down and financing costs are up.

We see that sellers are starting to move a bit in the direction of the buyers, and buyers are comfortable confirming some trades, although at the end of the day, most buyers pulled their bids as buying was a bit to easy for most. The market for liquids is showing mixed signals. Cream and SMP prices are keeping firm, but raw milk remains cheap. Cream prices for easter demand trade between € 5200 and € 5400 fca, but after easter, we have heard offers at € 4950 again. SMC prices still trade roughly at € 1700 fca France and € 1850 fca Germany.

Meanwhile, the FED in the US continues to increase interest rates. Some analysts might have expected a slowdown, but it's clear that inflation remains enemy number one. Even if the banking system shows signs of weakness, it seems the FED will take this as collateral damage. We saw the USD lose strength against the Euro, causing EU export deals to lose another 1-2% in competitiveness.