154th Edition of Foodcom DAIRY Newsletter
A hearty thank you (not really) to a person who, observing the current situation in the world, said that all that was missing was an invasion of blood-sucking snails. So, a few days ago the media reported an invasion of snails of the species Lissachatina fulica in Venezuela. Well, okay, maybe they are not bloodthirsty, but they destroy crop fields and are intermediate hosts of nematodes that threaten human life. Moreover, they give farmers sleepless nights. So when we say be prepared for anything, we really mean anything. Even for snails.
While we are on the details, you are probably wondering how the dairy sector is doing. Well, it’s not that bad (no snails here), but it’s not much better either. The period leading up to the U.S. Thanksgiving vacation is slowly coming to an end, which is reflected in a drop in demand and market activity. On the supply side, U.S. milk production is on the rise again. In September, production increased by 1.5% year-on-year.
A significant number of dairy producers have yet to meet their commodity needs for the coming months. So far, many have waited for the market to stabilize, but soon they will be forced to buy. There is a relatively large amount of milk on the market in the European Union, which affects the prices of other products. All market participants are wondering how low prices will fall, but at the moment it is difficult to predict. Many are waiting with bated breath for inquiries from China, which so far have not yet arrived.
Continue reading to learn about this week’s market insights.
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Freshly produced SMP
The buyers who did not commit to the previous purchases to complete the manufacturing quarter now have an easier time purchasing. This helps them get the quantities they want to fulfill the production for the coming months. The play-safe mode has rewarded buyers who did not commit to large volumes with tight collections and relatively different prices than last quarter.
Due to the ongoing contracts that customers still have for Q4 deliveries, the surplus of Whole Milk is not positively reviewed for purchases. As a result, there is a slight price decline when demand does not match the surplus. Nevertheless, there are no clear signs of action on the export side that could drive the price of the product above the current market.
We currently note limited availability of the product. Production of this commodity will not return to full capacity until March, when milk production picks up strongly around mid-month. Given the requirement for good quality milk for further processing, it is difficult to obtain it during these winter months.
The current FX market for the Q1 supply in Gouda keeps the product around 4.5 EUR/KG FCA. However, it is important to remember that the indicated price is not offered for Nov/Dec Q4 deliveries this year. For now, the price remains slightly below 4.85 EUR/KG on a spot basis, far from the Q1 price forecast expectations.
Although the price of Cream has increased significantly over the past week, we have not seen a similar trend in the Butter market. The product is currently offered at reduced prices. Quantities at the lower end of the price range have limited availability and may not be available for purchase in the foreseeable future. Following the patch of Skimmed Milk Powder, buyers behave situationally and purchase the required volumes from week to week.
Cream and SMC
Last week, the price of liquid dairy products, both Cream and SMC, increased slightly. They are one of the few dairy products whose price is currently rising.