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.
Last week, the dairy market came together in Warsaw to discuss the market and look into the future. After seeing all the presentations, we noticed quite a variety of different views on the market.
The first important factor is the milk output in China. We do believe the output is growing. The magnitude of the growth is unclear, but very important to make sense out of the demand picture. When we look at the import figures year to date, WMP is sharply down while SMP is much higher compared to last year. The combined SMP and WMP imports are still down 200.000 metric tonnes compared to last year.
Another interesting observation is the global trade of dairy products in March, which showed a steep increase. It seems like the price corrections are reaching the end consumer, sparking more demand from buyers who are generally shortly covered.
Butter tried to test new highs, but immediately bounced back to the 4600 euro level. SMP is trading around the 2500 euro level for Q3, which is lower than futures suggested the last couple of weeks. For a farmer, this returns to about 41 cents per kg of milk.It seems we are in a situation of little extremes. Milk is around, but not plentiful. Farmers are making margins, but are not incentivized to grow. Buyers are seeing prices suiting their budgets, but not as low that they would build stocks.
With that situation we need to consider the unexpected events that could occur. On the supply side, the situation seems clear. The Northern Hemisphere is past the peak and in New-Zealand expectations are modest. The demand side is coming from a depressed situation and we see the first signs of recovery in March trade data.
That makes us think that it's likely that an unexpected event would have a bullish effect on the markt, not a bearish effect. It seems most players are observing the market from a neutral standpoint, waiting for some signs of direction.
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