The EU markets have come to a grinding halt with little to no activity, causing prices to erode further.
It is summer holiday and that’s noticeable on the markets in terms of activity. Last week’s GDT saw an unexpected slide in prices resulting in a minus 8,9% on the GDT index. Especially WMP took a nose dive with an average decrease of 10,9%. Although other commodities went down sharply too, but where WMP is concerned it seems it is suffering from the vast Chinese stocks that are reported to be still at record levels in China with both importers and end users. According to a number of Chinese importers stocks are going down only minimally as a function of lower consumption on one hand and continued import of pre contracted material. We have seen Chinese buying stop somewhere at the end of March, early April. Given that GDT sells 6 months ahead it would logically follow that a real decrease in stocks will not start to happen until the last of the pre contracted products have arrived and no more is added. That point is somewhere at the end of August/ September. Effectively this signals that 2014 looks unpromising for new contracts out of China for EU, USA and SAM. What this means to EU remains unknown for the moment but it doesn’t look promising in terms of pricing.
That said, we have calculated before that if other countries keep importing at the pace they have sofar this year and China doesn’t buy any additional volumes, EU will still end up with record export volumes at the end of 2014. The question is, how do the additional exports compare to the additional produced volumes.
May exports from EU again show a terrific increase compared to the same period last year, albeit at a slightly slower pace than in previous months. Growth percentage for Jan- April were SMP + 66%, WMP 24%, Butter 23% compared to Jan-May growth of respectively 60%, 24% and 23%. In volumes SMP is now at272,000 mt, WMP 180000 and Butter at 52.800 mt. Cheese exports deteriorated further from minus 1% for J-A to -2% for Jan-May, arriving at a volume of 319.200 mt.
The SMP balance 31/5/2014 has deteriorated further in terms of available stock. The additional volume produced from Jan-May has been approximately 75.000mt but exports have increased by 102.000 tons over the same period.
It seems clear that there has been no excessive stockbuilding, yet prices keep eroding as a result of insecurity with regards to ongoing good milk production fuelled by high pay out prices, China’s buying behaviour in the 2half of 2014, insecurity in view of the current crisis with Russia that may potentially lead to economic sanctions and more general the summer period Europe is in, tradionally a very quiet period.
The official Dutch quotations further illustrate the current market as outlined above:
Product This week Last week ∆ change Trend
off. dutch quotations €/mton
Butter 3450 3490 -40 ↓
Whole Milk Powder 3040 3060 -20 ↓
SMP Food 2680 2800 -120 ↓
SMP Feed 2400 2430 -30 ↓
Sweet Whey Powder feed 920 920 0 -
Greenmark indices €/100 liters
TMV* Butter/SMP** 37,60 40,22 -2,62 ↓
TMV* Cas/Whey/Butter** 41,17 41,17 0 ↓
TMV*Cheese/Whey** 40,57 39,38 1,19 ↑
* 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 and/or optimalisations such as milk standardisation.
For the 17th consecutive week, the best valorization is Caseinate/Whey/Butter. Breaking with the trend in the past weeks, we see now again SMP/Butter drifting off again on the back of weak SMP pricing. Cheese is doing remarkable well given the higher production aversus lower exports and is now 2nd best in terms of milk valorization.
WHEY & WHEY DERIVATIVES
Higher WPC’s are stable to slightly weaker. WPC80 now traded at levels around the € 7000/t but more often just below that.. WPC35 prices are slightly deteriorating because of lower SMP prices in the Feed markets. Permeate in demand and availability improving. SWP for feed currently trading at € 925/t and € 950 for Q4
SMP for food clearly weaker. Current pricing for SMP lies between € 2550-€ 2800,-/t depending on origination and/ or final export destination. Last week Liquid Skimmed Concentrates (LSC) were traded at levels as low as € 2050/t but have meanwhile recovered to a level of € 2300/t.This is one of the few times in the current year that LSC and SMP seem to be at par with each other. In spite of the higher LSC prices, SMP still has a tendency to go down futher and in Feed is already traded below LSC parity. Currently pricing for Feed SMP is traded at € 2375/t for nearby delivery and closer to € 2300/t for Q4 delivery.
FCMP again weaker. Prices between € 3050-3150,-/ton depending on origination and/ or final export destination.
SMP for Feed very weak at € 2375/t for spot delivery.
Caseinate pricing seems weaker. Caseinate priced today between € 8200-€9000 but we hear of prices below € 8000/t for Q4 already. Acid casein weaker at a level of around the € 7350/t and Rennet weaker too at levels of € 7200/7400/t.
Nijmegen, 23rd July 2014
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