Weekly Update: In Dubai to Buy?

Last week, despite our initial anticipation of a slow and uneventful period, we unexpectedly facilitated over 2000 metric tons of deals among our partners. With (fat) prices increasing fast we saw that more buyers came to the market to buy products, afraid to find sold-out sellers at the Dubai Gulfood stands. However, not everyone was inclined to participate in the bullish market trend. There remains a significant number of partners now visiting Dubai seeking insights into the international market sentiment. Sellers, too, have been patiently assessing potential buyers in Dubai, though most do not appear to be in a Gulfood giveaway mood. The initial feedback from the Gulfood floor is evident: sellers are present to sell, but only to those willing to meet their price expectations!

In the previous week, we observed an increase in milk, more skimmed milk concentrate (SMC), and even a slight uptick in cream. However, the most notable surge was in the number of buyers. With the imminent arrival of the EU milkflush in just a few weeks, many buyers anticipate increased market pressure compared to the previous year. Upon examining various graphs, we find ourselves leaning towards the consensus that a higher volume of milk during this year's EU milk peak is highly probable.

These same buyers are noting strong competition for SMP and cheese exports from the US and Oceania, coupled with a decline in demand for powders. Although butter exports held up well at the end of last year, there's uncertainty about whether the EU can maintain substantial butter exports now that prices have exceeded €6000 again. Consequently, most buyers are expecting lower exports, higher production, and consequently, lower commodity prices. To be frank, their reasoning appears quite logical.

Crowded Position Boosts the Price

The main issue we observe is that when many buyers anticipate the same outcome, they tend to adopt a similar strategy, which involves waiting for prices to drop. While this approach should theoretically put more pressure on sellers to lower prices, we haven't noticed any such pressure on the sellers' side so far. Interestingly, where sellers feel at ease, buyers start to feel a bit uneasy. Last week, some butter buyers deemed the waiting strategy too risky. As a result, with a surge of buyers entering the market simultaneously, butter prices shot up by over €600 in just a week! In the cheese market, we're witnessing a similar trend, although sellers appear content to find buyers at slightly higher prices, making the rally less intense. On the other hand, there doesn't seem to be any rally for SMP (Skimmed Milk Powder). Despite international prices on the rise, EU buyers aren't showing any urgency to make purchases. While EU producers are attempting (and asserting) to sell at higher prices, the market for SMP prices in the EU remains remarkably stable.

In Dubay to Buy

It does seem that many partners have made their way to Dubai for purchasing. In my conversations with several of them last week, those who didn't participate in the price increase are interested in understanding the international sentiment. They want to look the suppliers in the eyes while conveying that prices have surged by over 15% in just two weeks. However, seeing a decline in prices this week would be surprising. It's a situation where buyers need to make purchases, and sellers need to assess various aspects. They need to check if the milk intake aligns with forecasts, evaluate the availability of stock for selling, and explore the possibility of getting a better price than what most buyers have indicated they can pay. In a recent phone conversation with a partner late last Friday, they shared the following insights:

"Well, in the world of business, it seems Dubai has turned into the ultimate 'Pricey Paradise.' It's like a high-stakes poker game, but instead of bluffing with cards, everyone's trying to read the market's poker face. Remember, in Dubai, even the camels negotiate for a better hump deal!"

Meet Linda

Our colleague Linda is roaming the halls of Gulfood, available for a quick market chat, to give an introduction to Get Fair Dairy or even to onboard you as a new partner. You can request a meetup by sending a short email to linda@getfairdairy.nl .