Welcome to our weekly market update, in which we will tell you about the developments in dairy the past week and our expectations for coming week.
Hi everyone,
Welcome to the OpenDairy market update! Today we will give you a brief update on the latest market developments, and a quick analysis on farmgate prices in Europe.
After a quiet and weakening market over the past few weeks, we noticed some stabilization. Cheese and butter showed a short-lived correction while SMP prices still suffer from stocks available in the market. The Algerian demand will probably provide some support, but won't be able to absorb stocks due to age restrictions.
We took a look at the EU farmgate prices versus the synthetic return for SMP and butter. As you can see, SMP and butter provided a good return for processors during 2022. But this is changing now. Due to the collapse of fat and protein prices, higher farmgate prices are no longer justified. Despite the diminished returns, we hear more increases of farmgate prices in the foreseeable future.
It's clear that farmgate prices don't always respond to commodity price corrections. And when they do, it's gradual and with significant lag. This makes us believe that we can expect a strong European milk output in Q1 2023.
The demand developments in 2022 have been volatile. Many buyers have taken on extra stocks during the pandemic and the logistical uncertainty that followed. Now that container prices have normalized and stock levels at both supply and demand side are normal, the question is when buyers will stand up. And when they do, they will probably be spoilt for choice...
Thank you for your attention, and we welcome your comments and viewpoints!
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