Wait and See Tactics

Yesterday we had a market without any activity from our partner's side. With hopes for lower prices, we see buyers postponing their decision to buy, and the fear of lower milk intake keeps sellers from selling. Traders are not sure what trend will be dominating and we see most of our partners focussing on their 2024 budgets. It tells us most buyers are done for the year, but the sellers are in the exact same position. 

Speaking to producers they are really concerned about the milk collections. And looking at the milk intake in Germany (now well below the 2022 line) and the French milk intake we share their concern. Most remember 2021 when milk fell back at the same alarming rate and most producers got short on milk needing to postpone deliveries. In addition, they needed to pay high prices for extra milk, while their farmers got stuck on a low milk price. It seems they learned from their mistakes and now sell on a very low and conservative forecast.

Speaking to the end users they also think back to the previous rally, but the one of Q4-2022/Q1-2023. With prices dropping over  € 1500,- per mt most purchase managers don't want to be caught again with very expensive stock and forward contracts. We therefore saw most of them active when offers for Q1 were available around € 4500-€5000 levels, but now they don't want to engage at the same prices they contracted last year. We therefore see that end users have covered their needs for H1-2024 conservatively and would expect the majority to still be active in Q1 covering their remaining demand, depending on their sales to their customers.

Looking at the liquid market we see a typical end-of-November market. With cream prices moving between € 7300 and € 7700 this week it seems we are nearing the top of cream demand. SMC prices are reported between € 2300 and € 2500 and raw milk prices between € 0,46 and € 0,50. Judging the sentiment among the partners who trade liquids it seems most expect the market to remain very tight for the first months of 2024!