Weekly Update: Early Holliday Mode

Last week the market seemed to announce its holiday mode early this year. Although the activity in the first half of the week was still okay-ish, the second part of the week was slow in activity. Normally the quietest period in the market begins in mid-July and ends in mid-August. This year it feels like we could enter the holiday modus early. 

At the beginning of last week, it seems the last end users came to the market locking in their final demand for Q3. The spot market has completely come to a standstill, besides the market for Gouda/Edam and Mozzarella. Spot demand for the south of the EU is still ok, keeping cheese prices stable. But with most buyers gone for now, we think that the sales side of the market still needs to act. In the period March-June we have seen a lot of buyers lock in Q3 (and some Q4) volume with few sellers willing to act. This boosted market prices. We now expect to see the 0pposite.

Preparing for a healthier balance

Last week we wrote that we believe a healthy dairy market needs higher commodity prices. But before the market will become healthy we think it will need to go through a heavy detoxing period. The market feels a bit obese and before we can see healthy prices again it needs to lower its intake and increases it usage. The market needs to lose its (old) stocks and find a way to boost consumption.

With a lot of demand filled and production still on a slight increase v.s. last year we expect the market to trade on lower prices in the months to come. Only by lowering the price of commodities, we think the market can quickly burn through the heavy stocks. And the fortunate side effect of lower prices is it boosts demand. We know it's not a popular opinion, but we think the upcoming months are a chance for the market to quickly correct and prepare for a bounce to healthier levels after summer. Because if prices will linger on last week's levels, production will remain ok, stocks will not shrink, demand will not get a boost and a long and slow recovery of the dairy market might be the result.

Slow week expected

We know it will take some time for sellers to accept that demand for close by is gone for now, so for this week, we expect nothing exciting. The last week of the month is usually a slower week compared to the first weeks of a month, add the summer holiday mode and the already slow demand from the world market, and all ingredients are set for a week without much activity. If the market doesn't provide any new insight we keep our updates for the upcoming week short and a bit shorter than normal.