Bearish Signals Stagnate the Bullish Sentiment

This week so far hasn't been easy to get sellers and buyers aligned. Especially in the butter and cheese market buyers' and sellers' expectations are far apart and availability for both products seems to be low Sellers are in no hurry to sell and with bullish fundamentals are happy to wait for buyers to come to the market. Buyers at the same time claim to be covered well and have no hurry to buy. It's a Mexican standoff in the EU market. The only market with some movement is the powder market. With pressure on the international markets, EU prices are starting to trade lower. 

That the market in Q4 is always a bit harder to read is not new. The fact the highest demand period comes together with the weakest production period in the EU troubles the view of the actual supply/demand dynamics. Therefore Q4 is usually the most bullish quarter of the year where prices for liquids influence the spot prices for commodities. This year the spread between prices for liquids and commodities has been too big for a long time, and a bullish rally was due. But now milk supply is starting to go up slightly the bullish tones are weakening and the bearish signals on the world market are starting to influence the buyer's mindsets again.

Looking at the world market we see that protein prices are suffering a bit. SGX futures prices are showing firm corrections, and CME prices are on a slide pulling the EEX market down as well. We are now down roughly € 200,- on futures prices in 10 days, as a significant move. Milk production in NZ is showing some recovery and the El Nino effect seems to be less severe as some feared (so far). And with lower prices in NZ and the US EU sellers aim their focus on the internal market again, finding that apart from some buyers on the feed market, food consumers aren't that eager to buy at the current market prices.

On the world stage, we also hear some slowdowns in demand for fats. Apart from Ukraine we now hear little buyers appear at the current market levels. CME prices have firmed a lot over the last weeks but are starting to slow down as well. We also see a strong backwardation on the forward curve that indicates the short-term bullish prices aren't being paid forward.

Looking at the market for liquids in the EU we are seeing some mixed signals. Raw milk prices are flattish to slightly lower at 44-45ct we hear. Prices for SMC in Germany went up, while in France prices took a dive and prices for cream show the opposite movement with French cream well above € 7000 but with western EU cream down between € 6650 and € 6900 (wide spread). It are slightly more bearish signals that make buyers withdraw from the market, and sellers take a small step forward.