Due to Sial and travels, during week 43 there will be no update published.
In brief : Market very quiet and prices remain under pressure. Feed SMP trading today under intervention prices at € 1670/t. Also SWP under some pressure, currently trading at € 835/t.
In USA especially price of Butter is coming down. In the past week it lost abt 1650/t but gained a little bit in the past two trading days.
WEEKLY DAIRY MARKET UPDATE WEEK 42
EU market activity remains very flat for the third week in a row with the only notable action being a trading down of prices.
This week, the August export figures were published. Although strong, they disappoint against expectations. August is the first month of the Russian trade ban and that shows. Overall figures remain very good but declined sharply against their Year to Date (YTD) averages.
product August YTD July average monthly exports ∆ Aug v YTD
tonnes tonnes tonnes
SMP 47900 54643 -12,34%
WMP 25900 35086 -26,20%
Butter 8200 10471 -21,70%
Cheese 47100 64714 -27,20%
Whey powder 38700 43286 -10,60%
Although the Russia trade ban strongly contributes to the declines, the issues underneath are broader and more complex than just that. Of course Russia plays an important part in the Cheese and Butter import declines. For both products Russia has been the number one importer from EU. The respective declines are more or less the same as the average monthly imports from Russia. For WMP however Russia doesn’t even register in the top 10 of Global importers from EU and yet, there we see a whooping 26% decrease too. From what we can see this is mostly on the account of Middle East import destinations which most likely have switched to importing Oceania origins. But also a country like Cuba went from + 144% at mid-year to + 87% YTD August.
Total exported volume YTD for SMP is 430.400 tonnes. In other words: At two thirds of the year, EU exported 6% more than it did in the full previous year ! Quite an accomplishment. However: Also SMP exports slowed down albeit more modestly. Mostly this can be explained out of a slowdown of imports from Asia. China SMP imports from EU were at mid-year 130% above the same period last year. In August that has gone down to 68%. Countries like Indonesia, Vietnam and Malaysia slowed down significantly too. In part this is offset by significant increases by Algeria (YTD + 139%) and Saudi Arabia (+ 161%)
Given this clear break in the trend, it remains to be seen whether our extrapolated figures of last week hold any ground. If we do the same exercise as last week all over again, based on the strong decline in growth, we come to SMP exports of probably 40 to 50.000t less. The overall, picture by the end of the year would then show a stock level for SMP of 185.000 – 245.000 t. No small beer by any means with the potential to erode prices further to the point where Intervention becomes a reality. And, in all honesty we are not far removed from that point today. Feed grade SMP is traded today at € 1700/t for deliveries in Q1. Practically AT intervention level.
Yesterday’s GdT did little to change the going sentiments. Although the overall results showed a plus of 1,4% a further analysis keeps the alarm bells going. Prior to Event 126, Fonterra had announced to have decreased their WMP volumes against earlier forecasts. In spite of that gains were rather small and as the below table illustrates, hardly made a dent in the losses made in Event 125.
WMP Event 125 Event 126
C1 -9,9% 2,9%
C2 -10,7% 3,5%
C3 -10,1% 2,8%
C4 -9,7% 3,9%
C5 -3,5% 0,1%
C6 -10,0% 3,1%
Looking at SMP, losses were booked on all contract periods by all sellers apart from Amul. Of the 20 Trade Event we witnessed this year the results were once that SMP GdT average remained the same as the previous event, twice that it actually went up against the previous event and seventeen times that it went down. In this period the average winning price went from $ 4698 to $ 2462, a decline of abt 48%.
The market remains very bearish on the back of ongoing increases in milk production and a faltering Global market place. At the current pace, as mentioned above, EU intervention is just around the corner and it’s becoming a realistic scenario for the first SMP to move into IV storage as soon as November.
* 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.
EU prices have again kept fairly stable the past week. In fact they have been quite stable since early September. This is illustrated by the flat curves in the table above for the past 4 weeks. By the first signs, this is changing very quickly and in all likeliness all prices will move down.
On the back of stable Whey and Butter pricing and Casein/Caseinate prices that are well above their SMP equivalent, The best valorisation remains Cas/Whey/Butter.
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 remain stable. WPC80 continue to trade at levels around the € 7000/t. WPC35 prices are stable to weaker following SMP movements. SWP slightly weaker.
Whey and its derivatives remain to hold a stable outlook because of expected declines in Cheese production. Also Lactose seems to be more in demand which makes sense because the combination of lower cheese production and more requirements for standardization.
SMP weaker this week in spite of strong export business. The current pricing for SMP lies between € 1850-€ 1900,-/t depending on origination and/ or final export destination. Feed SMP made a nose dive this week and is now traded around levels of € 1700/t.
FCMP stable is spite of exports slowing down. 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 stable(ish). Caseinate priced today between € 7450-€ 8200/t., but we hear of even lower prices. Fonterra seems to be selling the high end quality at the low end of this price range. 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, 16th October 2014
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