Due to a technical problem, the update for week 40 will be published on 2-10-2014
WEEKLY EU MARKET UPDATE WEEK 39-2014
The EU markets have lost its active mood in the past week and now seem to be plodding along in search of further direction.
From what we gather from participants the Onil tender has been finalized. According to these, total quantity done was just under 70.000 tons split between SMP and WMP. Most of the WMP goes to NZ and the lion’s share of the SMP to EU. The latter isn’t conclusive in that traders usually offer with an option to supply either EU origins and/or other origins. Today the cheapest option would be EU but in principle that can change over the course of the delivery periods at which point other origins may be delivered. For the moment however there’s all reason to be content with this result but as we pointed out last week, this is much needed too.
To further assess EU’s position for the coming months, we took a look at the US market and did a similar analysis as we did last week for EU although we remark that the US market dynamics are very different from ours.
Up to the end of August, US produced 1,12 million kgs more milk than in the same period last year, or 1,8%. Some 960.000kgs of this was absorbed by addition exports. In the period from Jan- June, according to USDA dairy imports fell sharply. In terms of skim solids, 42.638 tons milk equivalents ( Meq) less were imported compared to the same period last year. The decline in import of milk fat solids is even more staggering: 150.000 tons Meq!
On the whole, domestic consumption ( disappearance), and this is where the US differs significantly from EU, went up strongly during Jan-June. In terms of milk fat solids, the domestic disappearance increased by 715.000tons Meq, where nonfat solid consumption declined by 194.000 tons Meq. So far figures for July and August have not been published yet so we can’t be sure if these tendencies have continued.
It is clear to see that the supply side falls short to satisfy demand. Especially when we break up the import shortfalls into specifics it becomes more clear why US butter prices are where they currently are. Increased domestic consumption, decreased Imports and increased exports keep the market in short supply.
USA production during September – Dec is forecasted to grow and also increasing imports on the back of high domestic prices will have an impact on the market dynamics.
For the EU, this offers a splendid opportunity to increase exports to both USA and traditional export markets of the USA. Given the enormous milk surpluses this is more than welcome but if it will be enough to solve the issue remains to be seen.
The EU measurements that were called into action are being seriously used. Especially for Cheese of which already 100.000 tons have been stored under Private Storage. Butter nearly 9000 tons and SMP 4300 tons. As the duration of the time these goods may be stored under the program it does little to the market but is beneficial to the owner of these goods.
This week saw the publication of the August China import statistics. Clearly growth is declining somewhat but still the figures are impressive. Just imagine if China did not have to deal with lower consumption, high stock levels and increased domestic production !
( In short all the reasons that have been brought forward to explain the ‘lack’ of buying appetite from China).
China imports ∆ July '14 vs '13 ∆ August '14 vs '13
* TMV = Theoretical Milk Valorisation in these product combinations. ** Values are calculated on basis of current salesprices and are including processingcosts but excluding revenue out of by streams or optimisations.
The first weeks since a long time that we see prices stabilise or go up across the board.
For clarity’s sake: The Dutch quotations are a reflection of the week prior to this publication. The TMV indices are a reflection of the market today.
WHEY & WHEY DERIVATIVES
Higher WPC’s are stable. WPC80 continue to trade at levels around the € 7000/t. WPC35 prices are stable. SWP improved again. Today it’s traded at € 890/t, after in traded at € 920/t earlier this week. Whey and its derivatives remain to hold a stable to firm outlook because of expected declines in Cheese production. Also Lactose seems to be more in demand which makes sense because of lower cheese production too and on top of that more demand for standardisation.
SMP stable this week with a very slight firmer undertone due to Onil. If this sentiment will survive the coming weeks remains to be seen. Current pricing for SMP lies between € 2000-€ 2150,-/t depending on origination and/ or final export destination. Feed SMP traded around levels of € 1800/t but some lower priced spot lots are in the market.
FCMP continues to be weak but has appreciated this week on the back of expected Algeria orders. Prices between € 2300-2450,-/ton depending on origination and/ or final export destination. Given current Oceania pricing however, exports are unlikely to occur and the product remains under pressure.
Caseinate pricing weaker. Caseinate priced today between € 7450-€ 8200/t., but we hear of even lower prices. Acid casein weaker at a level of around the € 7250/t and Rennet weaker too. Lowest we heard this week was a level of € 6700/t for Rennet casein. In view of the current developments in SMP the market the trend remains down. In SMP equivalent, prices should have to be around € 6000/t but there’s still a long way to go before we are there.
Nijmegen, 24th September 2014
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