Market Update - March 24, 2023

March 24, 2023

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. 

This week, the market seems to be stuck in indecisiveness. On the supply side, there’s little news. Milk prices are still well above break even, and even the valorisation of dairy commodities is likely to return above the cost price of production. Especially with agri commodities and energy prices easing, there’s sufficient incentive for farmers to produce as much as possible. We see the same situation in the EU, as well as in the US. 

In our last edition, we focused on the demand developments in 2022 and concluded that global import demand proved to be resilient, even with historically high commodity prices. We wonder, however, if 2023 will show a similar situation. The last GDT showed again that there’s very limited appetite to fill pipelines and replenish stocks in the world. China is buying modest volumes and South East Asian buyers bought the lowest quantities since May last year.

This is what we notice in the spot markets as well, buyers have very little urgency to lock in volumes, despite the lower prices. We even hear anecdotes of factories reducing their output as consumer demand is lacking. 

In earlier updates, we expected milk production in the Northern hemisphere would push prices down in March and April. But we also expected the output would be cut drastically once the flush ends and buyers would be keen to lock in volumes before that happens. This would lead to a bullish second half of 2023. But with the current demand dynamics, this moment could be pushed forward quite a bit.

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