Market Update May 8, 2023

May 8, 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. Last week we sensed an increase in demand activity. How have things turned out last week and how does this affect our forward view?

Looking back on GDT, the expected increase became reality. The Chinese buying for WMP and AMF was back to the normal historical percentages. South East Asia showed a slight improvement in performance as well, but overall we are not too excited about this result. The powder prices are still moving on the lower side of the spectrum, which should spark more demand than we currently see. Although South East Asia showed a slight improvement in participation, we can’t say they joined the party again with overall demand still low. 

The European powder market has been holding steady driven by Algerian tenders. The North-African buying has kept the market on its feet, despite anecdotes about large stocks building for cheese and milk powder. It seems like EU producers took a nice share of the ONIL tender, which could explain their reluctance in offering in the last few weeks. The prices concluded seem to be nicely in line with today’s market levels. Overall, EU remains competitive on the protein side. 

It’s hard to make sense out of the current market situation. We would have expected more price pressure as the milk output in Europe and the US is steady, especially considering the global demand. In both regions we see supply driven mozzarella being frozen and in Europe, liquids prices are trading way below the dry equivalents. For now, it seems the increased cheese production capacity is absorbing the surplus milk, while prices hold relatively steady. We expect to see increased pressure in the exportable cheese range. 

The fat market seems to be holding steady as well. The price correction of last year will soon hit the consumer as well which will probably result in steady demand numbers. In general, we see buying interest for the second half of the year. Even with the current forward premiums, we expect the prices are still budget friendly for larger and smaller buyers. 

The summary of the current market is that the spot fundamentals are quite bearish. But we don’t recognize this in the current sentiment. It seems like the healthy buying interest and corresponding premiums are keeping the spot commodity prices on their feet. We just wonder how Q3 will turn out when hedges expire and 6-8 months old product will hit the market. Demand needs to be better than today to offset that supply effect. Interesting times ahead!

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.

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