Pre-GDT Dairy Digest

The market seems to be waiting this week for what the GDT result will be for week 3 of 2023. And as always they won't have as big of an impact as some expect. They are the most relevant for SMP and WMP, but for cheese, butter and AMF we don't see a big relevant link with the EU internal market. 

At the moment the EU market is faced with more imports, fewer exports, more production and less internal demand. The inside market dynamics will have a much bigger impact than the outside market dynamics. For SMP the forecast from the market seems to be quite stable, but we are less optimistic. Looking at the EU market and the aggressive offers we hear that are out there, we would expect the GDT result for SMP to be down between 3-5%. WMP might be able to keep its previous level, but taking in the overall market sentiment we would expect a 1-2% decrease as well for WMP.

Looking at the fat market futures seems to indicate that there might be a small plus. We would be surprised to see NZ show a counter-movement compared to what the world market is doing. Since the previous event Europe has lost about 10% of its value on butter, we would expect to see a minimum 3-5% decrease as well on the GDT. AMF we are not sure where it should trade, but logically it should post a negative number as well.

Overall we think we will see a 2-3% decrease in prices, so the headline for the GDT will be bearish.

Looking at the European market we started with more sellers and we struggle to find buyers. We hear the situation for liquids is starting to look more and more hectic as more products need to find a new outlet. Producers might be eager to sell their commodities cheaply, but the last thing they want is to produce too many additional volumes. If indications from our friends in the south of Germany and Italy are true, we will see the market take another nosedive tomorrow.

In the meantime, energy prices continue to trade lower and lower making production for drying dairy liquids a bit more attractive. Dutch futures are trading at € 55,-, the lowest in a year time and € 290,- below its peak last summer.