Negative GDT temperes market expectations

With yesterday's GDT posting again a small negative number, the expectation that the export market will start to pull on products again is dialled down again. Although it's mainly WMP that is pulling down the market, SMP and Butter aren't showing a convincing upward direction as well. How the results will reflect on the European market remains uncertain. These results will feed the market bias of both sellers and buyers as it has (again) enough information for bullish and bearish partners to pick the favourite data. 

Looking at the results of the GDT the most surprising result came from cheese. With a plus of 7.4%, the heavy correction from the previous events is bouncing strongly up again. C1 even saw a trade at $ 5660,-, roughly $ 1000,- above the C3 price.

Looking at the other fats, AMF and Butter, C1 and C2 are quite firm, but the forward curve shows a strong correction for butter produced during the NZ flush. It seems to show the complete opposite curve as we see in the EU. This suggests that ZN butter will be in heavy competition with EU butter starting Q4, especially if the EU curve continues to trade up! AMF is still trading at a discount vs butter, suggesting demand for AMF remains weak.

SMP shows a flat number, 0,0%. The SMP forward curve looks to be suggesting that the demand/supply ratio for NZ products might cause lower prices. Again the opposite curve as we see in the EU market. We think the impact of a weaker NZ SMP price will have a harder impact on the EU market price than it will have on butter. We think the sluggish SMP sales should be a worrying sign for SMP sellers in the EU. WMP took the biggest hit, with a minus of 3%, suggesting Chinese demand remains low.

Back to the EU market

And then taking our look back to the EU market. Looking at the Arla SMP trading from the EU we see that with a $ 2600,- / € 2450,- price, it is available at a good discount compared to what the other EU producers are offering at the moment for August (we hear € 2550-2650). Speaking to partners who were expecting that the GDT might set the market back in motion will be a bit disappointed.

On the liquid market, we didn't hear much action yet. As far as we can tell cream prices are still available between € 5350-5500,- and buyers aim at lower levels. SMC prices are in line with last week's prices, but also on SMC we hear the activity has been low. So far the hot weather doesn't seem to impact the price for liquids that much (yet).

Different traders have different views. With a tighter French milk supply, a hot weather forecast and the risk of potential drought, the fear that people will have to fight for volumes grows again. But the apparent sluggish demand for fresh products is worrying other more than the potential lower supply. Inflation is killing demand for fresh products harder than for regular retail food it seems. (fresh food is more a nice to have, the food you buy at the supermarket a must-have). We speak from experience ourselves. This weekend we took our son out for ice cream in our hometown Weert. My son took 2 scoops of ice cream (strawberry and chocolate) and I took 2 scoops as well (both stracciatella!) and we had to pay € 10,-! for two ice creams. Even though the ice cream was very nice, it still left a bittersweet aftertaste.