Buyers and Sellers growing apart.

A remarkably quiet Wednesday after a bullish GDT, that is how we would summarize yesterday. The market is sending mixed signals and therefore we see that the expectations between buyers and sellers are getting wider again. Because there is information out there that can be read as bullish (firm gdt, firm futures, no offers for Q3+Q4) and as bearish (low cream prices, low demand, high stocks). 

We got some more feedback on yesterday's surprising GDT result. Strong demand from the middle east seems to be the biggest driver behind the firming SMP prices. Over 50% of the contracted volumes went to the middle east, an unseen result. The middle east has now bought more volumes already in 2023 than it did in the whole of 2020/2021/2022. Some expect that their purchasing needs might slow down now as more most don't expect this to be an effect of increased demand.

Looking at the liquid market today we see more pressure on liquids. Cream prices have come down to levels between € 4800 and € 4900 fca and we hear forward prices for May are just above € 5000,-. SMC prices eased down a bit as well, but raw milk remains relatively steady around 30ct give or take.

But the pressure on liquids didn't translate into lower commodity prices, in fact, we see the opposite effect. The firm GDT has given most sellers the confidence to aim for higher prices, most of our offers got pulled and most producers have increased their prices. Our only question remains what effect do the sellers aim for? Because at the lower prices of earlier this week, it was already hard to attract buyers, now on these higher prices demand has disappeared completely.

Stocking products is becoming harder and harder as warehouses are filling up quickly. Those who will argue that we don't know how much dairy is in the freezing houses are absolutely right, but the problem doesn't change. We hear Irish producers are looking for storage space in the UK, the Netherlands and Belgium as warehousing capacity in Ireland is getting filled up quickly. But reports from our partners about UK, NL and Belgium warehouse space aren't optimistic.

Simultaneously the situation in H2 is also getting tighter. Buyers who have been waiting for offers are getting more active and bids for products in H2 are increasing again. Most of our partners just aren't willing/able to offer for H2 2023 as they don't want to speculate, and the cash-and-carry option isn't attractive enough (yet).

So we see a standstill in both selling in Q2 (due to lack of buyers) and Q3/4 (due to lack of sellers). But the buyers do seem to have time on their side as pressure will grow on the sellers first, and most buyers will wait for that pressure to break the prices down again.