The EU markets seem more stable this week than in the previous weeks and prices appear to be stagnating at last week’s levels.
Especially in powders producers do not yet follow the extremely weak price forecasts of the trade, with the exception of those plants that operate on spot milk supplies. There are only few of them however as most, by rough estimation 85%, milk is committed by Coops or private enterprises against fixed prices for one month ahead. Cooperatives remain resolute in their assertions that farm gate milk prices remain close to current levels during the next 4-6 months.
Cheese however remains a driving factor in the determination of milk pay out prices. Currently Gouda foil cheese appears to be trading around levels of € 2500-€2650/t. Cheese taking care of 50% of all milk supplies, one wonders what rational basis there is for a milk price around the €0,40/kg and if such a price can indeed be afforded by Coops in the next months. Judging by the indices in the table below, the answer looks like a clear ‘NO’.
Since two weeks, world demand seems to be improving and at current price levels vs US Dollar rate, EU is well placed to fill in a lot of that demand.
The general impression is that the market is principally under covered and significant short positions have been taken by the Trade which causes a more stable demand/supply situation for the spot terms than for the future terms. This situation can potentially push price levels for the nearby term further into the future, effectively eliminating the chances of prices falling through the floor.
It will be interesting to see how the market develops further into the 2nd half of this year. Will milk continue to be produced in record volumes, will we indeed see climatical disturbances caused by El Nino, what will happen with Ukraine/Russia?
For the moment however, milk is plentiful all over the EU.
For the 8th time in a row, official Dutch quotations went down, or remained unchanged;
Product This week Last week ∆ change Trend off. dutch quotations €/mton
* TMV = Theoretical Milk Valorisation in these product combinations. ** Values are calculated on basis of current salesprices and are including processingcosts but excluding possible revenues out of by- streams of product and/or optimalisations such as milk standardisation.
For the 6th consecutive week, the best valorization is Caseinate/Whey/Butter. Caseinate pricing did not follow SMP pricing moving up and now that SMP is going down, Caseinate remains stable, thus ensuring a better valorization for the time being. Also Butter is holding up well compared to other dairy commodities. On the back of continued weak cheese pricing the Cheese/Whey combination is worst off in terms of valorization which we can’t see changing on the short term with stock building at producers.
WHEY & WHEY DERIVATIVES
Higher WPC’s remain stable at prices around the € 7500/t. WPC35 short in supply. Prices keep getting weaker though, because of lower SMP prices. Lactose stable around the € 1050/t mark. Permeate in demand and availability improving. Prices however deteriorating to below 70% SWP parity. SWP for feed currently trading at € 880/t.
SMP stabvle(ish). Skimmed Milk Concentrates continue to be weak with continuing processing capacity restrictions. Lowest prices traded this week just over € 1000,-/t becuae of the Easter weekend but for regular business slightly more attractive prices are achieved. Current pricing for SMP lies between € 2600 -€2800,-/t depending on origination and/ or final export destination and may erode further, given the huge gap between raw material and end product, once the production capacity has improved. Note that for the very nearby/ prompt delivery, higher prices are achieved.
FCMP stable. Prices between € 3400-3550,-/ton depending on origination and/ or final export destination.
SMP stable to slightly firmer at € 2390/t.
Caseinate pricing seems stable. Availability is rather sufficient within the EU. Caseinate priced today between € 8200-€8850. We have seen a wider gap emerge between different brands. Acid casein stable(ish) at a level of around the € 7750/t and Rennet also stable at levels of € 7600/7700/t.
Nijmegen, 23rd April 2014
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