Market Update May 22, 2023

Hi everyone,

Welcome to the OpenDairy market update.

We look back at a bullish week with limited activity. Although the volumes offered were very low, the GDT set the tone for the market sentiment.

Where WMP remained relatively stable, we believe the SMP results require some context.The first interesting observation is the increase in South East Asian buying. The last price increase was caused by buying from the Middle-East and it seems the buyers in South East Asia are slowly waking up to cover Q3 volumes.

If this trend continues it could provide support to the SMP market. At first glance, it seems New-Zealand prices for SMP turned bearish, but reality is that prices just corrected back to global levels.

The EU prices on GDT increased and reflect the current market in Europe. Despite anecdotes about high stocks, we don't see sales pressure. We still think hedged product will hit the market in Q3 and Q4, but this will only dampen the bullish trend a bit.

In the US, the pressure seems to be building. Contrary to Europe, where we have experienced the majority of volume pressure before the flush, the US seems to be struggling with surpluses right now.

Cheese prices have plummeted and NFDM prices are weak as well.In the current landscape, it seems like the US and the EU are fighting for the export buyers. When comparing ex works prices, we have to take into account the higher freight costs from the US. The CME price for June is exactly on par with EU SMP prices. Considering the higher protein level, US origin seems to be the best deal this week. So where does this leave us? We are familiar with the US flash sales, in which short periods of competitive prices cause futures to rebound above market levels. But it seems the pressure from the US could last a bit longer this time.

This will limit the upward potential for the EU SMP, as export competitiveness is essential for the EU market. Interesting times ahead, with the key to the market direction lying in the US at the moment.

Thank you for your attention! Do you want to know the weekly prices we have seen trading at OpenDairy? Please sign up to our weekly wrap up as well.

‍