GDTeaser for the Anuga Event

Last week we had a very active market with a lot of volatility across all products. Different "Camps" are forming among our partners and the expectations for what might happen differ a lot! We have bearish partners who clearly see signs of overheating and expect the market to trade lower in the weeks towards Christmas. We have a lot of bulls who think supply will be underwhelming and buyers have postponed purchases for a long time, so a short squeeze in their eyes is very likely. And we have those who are lost in a sea of information and are happy to watch the market unfold as they just can't tell what arguments ways heavier.

We have been bearish for a long time, but our bullish partners are starting to convince us more and more and they have the current market movement arguing their case. But the next 10 days might be more important for the short-term market movement than some might think!

GDTeaser

The first big event will be Tuesday's GDT event. Looking at the SGX futures the market is pricing in another increase with the biggest increase expected for SMP. EU powder prices have already increased a lot since the last event and EEX futures have traded significantly higher. If the GDT results will outperform the SGX future expectations we are in for another bullish impulse in the EU as well. With prices for concentrate much higher than the current sales price for SMP, we expect production for SMP to remain low in the EU. On butter, the biggest gains seem to be behind us, although with expensive EU butter and record-high US butter international buyers who source in all three regions will be looking for the cheapest product coming out of NZ. We think Tuesday's GDT results will be a teaser for how the sentiment on next week's Anuga in Germany might be.

Cream Trading

This week will also be the first week of cream trading after closing the new retail prices. We wonder if the demand for fresh cream can drop as fast as some of our partners expect. If so this could potentially shift the dynamics in the EU commodity market for butter/smp v.s. cheese and why valorization. With strong demand for SMC we expect the market to release a lot more cream in the weeks that will follow. If demand drops at the same time we might see a perfect storm for the cream market. But if the market can keep its firmness it is also a signal for the market that there is more than retail demand driving this market.

Anuga Anticipation

Upcoming weekend Cologne will host again the Anuga event. With all trading houses, most major producers and a lot of end users present, the sentiment can create a new market movement. But as most partners expect a major impact from the Anuga sentiment, we see most have positioned themselves as "neutral" as possible. Producers are quite bullish and seem to be keeping some stock to sell to their new to-be-found partners, traders seem to be keeping a neutral position (or as neutral as can be) so they won't be surprised by a sudden market move. And end users seem to have been buying a bit extra in the last weeks before going to Anuga. These actions can be the reason for the market rallying a bit in recent weeks. A market with little buying interest and a lot of sellers willing to sell at Anuga can turn the market bearish again.

All things put together we think there is a pretty important week ahead of us. That said we also remember that the week before the Anuga never is very active. Most people want to "wait and see" what will happen at the event and what the sentiment will be. We see there are arguments for a bullish and a bearish market, but we will see what arguments hold up in the weeks that will follow. We think the next 10 days will answer a lot of questions and they will determine the market direction for the weeks that will follow.