Weekly Update: Easter Demand and Seasonal Pressure

In the past week, the overall market trend was relatively uneventful, except for notable fluctuations in the butter market. Cheese prices remained stable, while SMP prices exhibited a gradual decline. The Global Dairy Trade (GDT) displayed consistent results, and due to numerous partners being held up in Dubai, activity was confined to a small group of traders in the butter market. Upon reviewing prices at the week's end, one could argue that the butter market traded sideways as well. This week's opening in the butter market mirrors last week's, with the exception of a €400 increase in Cream prices. However, there's a variation in reported Cream prices.

Insights from Dubai indicate disappointment among partners who visited the region last week. Many anticipated gaining market sentiment feedback, but the global market sentiment appeared stable. It seems nobody has a strong conviction of any price ranges for the weeks/months ahead.  Buyers did not fly to Dubai to buy, and few deals were reported. While production outlooks for most regions seem solid, extraordinary production numbers are not anticipated. Although global demand for commodities doesn't appear robust, those commodities most affected by worldwide demand are already trading at the lower end of the seller's spectrum. Therefore, the market doesn't foresee significant downward potential for cheese and SMP.

Partners impacted by the relatively weak demand at Gulfood are likely to be producers. With fewer orders compared to previous years, suppliers may find themselves with (bigger than expected) surplus stock. Particularly for SMP and cheese sellers, the decision lies in whether to adopt a slightly more aggressive forward-selling approach or wait for demand to pick up.

As seasonal milk intake accelerates, playing the waiting game for another period seems unlikely. Western EU countries are witnessing a boost in milk production due to exceptionally mild weather conditions, reflected in the prices for raw milk and SMP. The cream is holding up reasonably well, indicating more about butter demand than cream demand. Anticipating seasonal pressure, sellers may choose to front-run the market. Germany and France are expected to produce significantly more milk during their peaks compared to the previous year.

The upcoming Easter season is expected to contribute to demand, potentially benefiting producers. Easter demand is projected to peak in the next 2-3 weeks, exerting some pressure on the buyer's side. The heightened demand in March may influence prices for April, particularly benefiting cheese sellers. For the butter market, the Easter demand implies increased interest in cream and butter in the retail sector. Traditionally, butter offtakes in the weeks preceding Easter are robust. In Germany, retail prices are yet to be negotiated, and there is speculation about whether sellers can capitalize on increased butter trades and close negotiations above €6000.