Bullish Export Sets Tone on EU Market

Apologies for those who expect an email every morning from our side. Yesterday we didn't send a weekly update because we were caught by the flu. And without a clear mind, we decided to skip the weekly update. But it would have noticed the same sentiment as today's update, which is bullish! The market continues to firm up it seems more and more partners are starting to realise that this bull run might not be a temporary spike, but the start of a longer, more fundamental rise. In the EU we continue to struggle to find buyers, but looking at the export market it seems buyers are starting to wake up. 

The bullish market really caught pace last Tuesday when the GDT firmed up over 4,5% and we saw Chinese demand coming back to the market again. Since then we see that other export destinations start to wake up as well. The fear they might be competing with the Chinese buyers again might have spiked a bit of extra bullish sentiment and we hear our partners are receiving a lot more requests for quotes again.

And it's not only powders that are requested. Demand for butter from Ukraine and Turkey is fueling the bullishness of the butter market. On cheese we hear demand isn't that great yet, and that the competition on the world stage for cheddar buyers is pushing cheddar prices even a bit lower. In North Africa, we hear more demand for SMP and fcmp. We do think SEA still has a good alternative to shop in Oceania and due to lower transport rates, they should still be the preferred supplier. Also for those who can source in the US, they will still find cheaper alternatives for EU products (as long as the exchange rate doesn't really change more) We hear buying interest for SEA and the Middle East inst booming (yet).

Looking at the outlook for the EU we did hear that on the forward EEX prices we see today (butter above € 5000 for the full year and SMP above € 2800 for the full year farmers now can lock in a year price for their milk between 41 and 44ct. Not the same price as they had in 2022, but still not bad. We do think milk supply at these prices will still be OK for next year, capping a bit of the bullish potential.

All things combined we feel the market for SMP and butter might rally a bit more this week. Although there is a serious fear of overheating we do think the balance between the amount of buyers and sellers won't change that soon and with prices for liquids still firm, the only short-term direction for EU commodities should be up.