The past week saw EU price levels decline further but recuperate a little at the end, hinting towards an initial overreaction on the Russian dairy trade ban.
For the bigger part, people have returned from their summer leave which is making for a slightly more animated market place. The Trade ban imposed by Russia has left its marks in changes in Product mix at the producers. At least, at those producers that have the option to switch from Cheese to Powders. Last week the Russian authorities made an exception for lactose free milk product from the import ban. It is all a matter of definition of course but this does not include cheese – lactose free as it may be. Russian buying appetite for future terms from allowed origins does not seem overwhelming so far, which is illustrative for great uncertainties also on the other side of the Russian borders. The Russian authorities have allowed for further relief in numbers of products falling under the ban provided ‘the west’ shows itself receptive to further dialogue. For the moment however the markets have to live with the situation as is, which makes it complicated to take positions on term in either direction.
Meanwhile China seems to move a little bit in its purchase attitude but this is not directly leading to much activity in the EU trade markets. That said, the Chinese import statistics for July were published, again showing great increases for most dairy commodities albeit slightly lower on a Year To Date basis then they were in June.
China imports ∆ May '14 vs '13 ∆ June '14 vs '13 ∆ July '14 vs '13
WMP 70,20% 73,50% 67,90%
SMP 88,70% 82,90% 68,10%
WHEY 0,80% 1,20% -3,10%
CHEESE 57,40% 58,10% 55,90%
BUTTER 125,9% 119,40% 120,90%
In spite of the overall decrease in Whey imports, EU Whey exports to China from the main exporters France, Netherlands and Germany increased in the same period by about 7,5%. It’s been since the end of March that we saw a slow down on Chinese buying activity on the open markets. That’s 5 months. One would think the excess stock situation should be coming to an end any moment now but maybe we still underestimate how much exactly was overbought. Whatever the case, the big question remaining is when they will be back.
Since about 10 days Royal Friesland Campina (RFC) has been issuing warnings that the September milk prices will be decreased. This is in itself unusual to warn beforehand and can only imply a severe decrease. Several sources are mentioning a decrease to € 0,30/liter which seems too big a step even though the markets don’t allow for much more.
It will be an interesting week ahead of us with new milk prices being published and another GdT event. Product/ton This wk € Last wk € change prices on 1/1/14 Change in value from 1/1/'14 Official Dutch Quatations
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.
Another week, the 9th in a row, with declining prices.
SMP/Butter has meanwhile sunken below the € 30/100 liter mark with Cheese/Whey following swiftly.
Casein(ate)/Butter/Whey remains fairly high but that is rather due to a lack of activity mainly in Casein/Caseinates than anything else. Casein and Caseinates are less of a commodity market and tend to follow movements in the market slower than for instance SMP. If we would put the value of Casein and Caseinates on a strict SMP parity, the TMV Cas/Whey/Butter would decline below the Cheese/Whey TMV.
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 slightly weaker. WPC80 now traded at levels around the € 7000/t but more often just below that. WPC35 prices are deteriorating because of lower SMP prices in the Food and Feed markets. SWP recovered slightly since its low point earlier this week of € 760/t. Today it’s again at € 800/t. In all probability this may have to do with forecasted lower Cheese output in favour of more powder production, thus limiting the whey availability. Lactose continues to be weak.
SMP for food weaker. Current pricing for SMP lies between € 1950-€ 2100,-/t depending on origination and/ or final export destination. Trend is weaker because of the foreseen switch from Cheese to SMP and WMP. Earlier this week, SMP Feed grade was traded at € 1800/t and just below but meanwhile it recouped some of its value and now trades at € 1850/t.
FCMP continues to be very weak. 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 € 7600-€ 8400/t., but we hear of even lower prices. Acid casein weaker at a level of around the € 7350/t and Rennet weaker too at levels of € 7200/7400/t. In view of the current turbulence on the market the trend is down. Trend is clearly 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, 27th August 2014
This report is updated every wednesday. Should you want to receive the report directly by email, please use the contact form on the 'contact us' page. Back issues available upon request.