The Dairy Update: Bears are on top!

Yesterday the market went through another bearish storm, and the forecast for the weeks ahead continues to be dark and full of headwinds for the dairy market. More and more key partners in the dairy chain start to realize that the quickly rising milk production in combination with significant demand drop-off will lead to an unsustainable market that will show a heavy correction. And with a lot of end users being away from the market today, those who were active managed to push prices again a good bid down.  

Looking at the GDT we see another minus of 3.9% overall with the biggest minus for SMP of 8.5%! Butter traded relatively stable, but is still discounted by about $ 1000,- against the world market. For SMP prices to be found below $ 3000,- we need to go back to July 2021, but this was just a single GDT. For a longer period than two GDTs with SMP below $ 3000,- we need to look back to December 2020. The GDT of yesterday confirmed the worldwide bearish sentiment.

Looking at the milk collections in the western EU we see the germans are steadily reporting + 0.6% more milk and the French are even up 1.2%. And looking at the numbers out of the UK we even see 2.4% more milk, the highest milk volume reported in the same in previous years. It is this quickly rising milk collection that starts to be a headache for western eu producers. It seems they have to manage delays in collections en fewer spot orders at the same time that their farmers are bringing in more milk than anticipated. We are therefore a bit surprised to see the western EU co-ops add to their pay-out milk price.

Asking around our partners that trade liquids, the market is expected to show a similar correction down. Producers are trying to find ways to keep milk out of production as much as possible. We expect the markets for cream, SMC and raw milk to correct just as the GDT did yesterday, bearish overall, but maybe a bit more on proteins.