Weekly Update: Summer Vibes to take control?

Last week we expected a calm market. And although brokered volumes were ok and prices did top off or dropped down a bit, we can't speak about a hectic week. Most participants are still waiting for a clear direction and so we were left with buyers and sellers that either trade on flat market levels or have some positions to close/get rid of for close by. For this week we do expect a bit more action. Hot weather, a GDT on Tuesday and only a few more weeks before purchases and sales managers will go on holiday, provide nice ingredients for a potentially explosive cocktail. 

Looking at the expectations for Tuesday's GDT, it seems most expect a slightly more bullish GDT compared to our expectations. Futures point towards a firmer GDT for SMP, Butter and AMF. Only the expectations for WMP are down. We are a bit more pessimistic about the results. Looking at the US and EU, we expect buyers in the middle east and SE Asia to be able to purchase their needs elsewhere at lower levels. And checking in with our Chinese friends they still warn us that their activity will remain on the low side for the next months.

A more bullish signal might come from Europe itself. With hot weather in the Netherlands, Germany, Belgium, and Denmark, milk production might take a hit, and consumption might get a boost. And although we saw prices for liquids go down last week, most liquids traders seem convinced that prices will go up again this week. Even bigger end-users have confirmed to expect more demand and a tighter spot market for cream, smc and raw milk.

And usually, around this time of year, we will see buyers and sellers for July / August come into action. During the summer holiday, most departments seem to want to clear their books (both sellers and buyers) as most team members will take some time off with their families. Even if the purchasers and sales managers will be in their offices, they want to have covered their main needs so they will only need to decide on their own about the last loads.

Whatever the trend may be over the next 14 days, we expect that trend to be magnified. So if we will see more producers coming to the market causing prices to drop, we expect that drop to be more significant than anything we have seen in the last 4 months. But the same we expect for a move upward. If we will see another bullish move, we expect this move to break above the price levels we have traded in the last 4 months.

With that said, we think this Tuesday and Wednesday might be key for the price setting for the next few months. A firm GDT and a tight market for liquids might kick the market into a new bull run. But a weak GDT with more downside on liquids might get us back to the lows that we saw earlier this year.