Weekly Update: Christmas demand is blinding the sellers.

Last week was a quiet week from our side, and we traded fewer volumes than the weeks before. Those deals that we were able to broker showed that the market is trading on two different tracks. On track one, we have the specific demand for close-by trading at significant premiums to the market, and we have generic trades for next year that are trading at a significant discount to the reported market levels. 

It seems that holiday / Christmas demand will be dominating the short-term prices for fresh products, but the supply-demand balance is dominating the price further out. We see that product that is offered after the 15th of December is significantly more expensive than the product after this date. We think it is safe to conclude that seasonal demand is keeping the spot market tight, but it is also causing some participants to miss seeing the bigger picture.

It seems the least "blinded" producers are the Irish. As they don't have such good outlets for raw milk, SMC and cream they see that the imbalance between demand and supply is growing fast. They have been selling commodities at lower levels at the end of the week. We hear Irish butter is offered well below € 5700 FCA, SMP prices are offered at around € 2850,- and cheddar prices are offered for the first time in a long time below € 5000,- again.

But the market for fresh cream in west-EU remains strong. Retail demand is reported strong and small-packaging butter is taking a lot of fresh cream from the market. But as history teaches us, this demand will fade quickly after Christmas (and probably after the first week of December). Cheese demand is already suffering a bit if we are well informed. This comes at the worst time possible for cheese makers as they have been pushing more milk into cheese production in the previous weeks. The bigger supply and the smaller demand is causing prices to correct fast. We do hear that at prices close to € 4000,- (for edam, gouda, mozzarella) export demand is starting to show a bit stronger.

Our expectation for this week is that we will see low activity for further out as long as demand for closeby feels ok. Most partners seem to think that strong demand will last until the first week of December. If we have learned anything over the last years we can assure you, markets will start to move sooner than this.