Resting in Gulfoods Shadow

Last week was again an interesting week for EU (and worldwide) dairy prices. With a surprisingly bullish GDT, the world market is waking up again. Worldwide spreads between EU, US and NZ prices are starting to become smaller and the question is if demand can boost the prices up across all regions, or if demand (or the lack of) might drag the market into a sideways market. Speaking to our partners at the end of last week it feels a lot of them have accepted that the current price levels might hold for the next weeks and most want to see how the Gulfood in Dubai will impact the worldwide sentiment. 

The Gulfood in Dubai is gaining popularity with the partners, and with that, the importance of the event is increasing. Most of our partners are either attending or exhibiting. People from all over the world are coming to meet their partners, to catch the latest trends, and to feel the sentiment of the commodity markets. With a GDT on Tuesday next week might become a very important week for dairy prices in the first 6 months of the year.

And with such an eventful week next week, we expect this week to be the opposite. It seems most of the buyers and sellers we saw in the previous weeks who were under pressure to buy or sell have made their own decisions. With sellers still needing to get sales in the books for the short term the downward volatility was extreme in the first few weeks of the year, and with buyers trying to buy the dip (too late) and needing to cover some open shorts, the bullish momentum in the previous weeks balanced out the steep price decrease of the first weeks. The last days of last week seemed to indicate that both sides of the market have no pressure to act for February and March and so we expect a slowdown in volatile price changes.

What to watch for this week?

Will this week be without any importance? of course not! There are a few things we will be following closely as they might affect the mood EU buyers and sellers will bring to Dubai. First of all the start of the Irish Milk season should start to show its first signal of how it will be. So far we haven't seen a lot of selling done by the Irish Coops as most still don't have a lot of milk. We see in the forecast on the StoneX Plus platform that for the first three months, the Irish are expected to produce less milk compared to the year before, but starting April they forecast that the Irish will milk more than the previous year.

But it is not only the Irish Milk intake that has our interest. The French milk intake is recovering faster than most anticipated and therefore more milk solids have to find a commodity to be produced. Last week we saw that the spot market for liquids remained stable for some products, but even slightly weaker for others. Raw milk in the EU came down and so did SMC prices. If the milk intake can continue its better-than-expected increase we expect that the stronger EU milk intake might be a talking point in Dubai.

Last but not least we would be keeping our ears open to hear if there is more export demand. With EU butter being cheaper on the world market, the bulls need a bit of traction from the export markets to keep the bullish momentum on butter alive. At the end of last week that momentum started to fade a bit.