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EU DAIRY MARKET UPDATE WEEK 49
The EU markets remain fairly turbulent with contrary movements in liquids versus powders.
Based on current SMP and Butter prices ( including assumed production costs for each approx. € 200/t, but excluding positive gains from buttermilk and standardization), the theoretical value of raw milk used in SMP/Butter has risen since last week to about € 44,33/100 kgs., nearly one cent up per kilo since last week. Most of the gain is on account of stronger SMP prices in both Food and Feed use.
SMP remains very firm while at the same time, liquid skimmed concentrates have eased to a level of < 3050/t. Most probably this finds its reason in drying capacity constraints during December as it is in stark contradiction to the movements on the powder market.
Yesterday’s GdT saw yet again another good gain of 3,9% on the GDT price index whilst volumes offered in FCMP were the highest ever, e.g. 35.000 mt. In the next GDT’s, volumes will be brought down drastically for FCMP. In the next three GDT’s, volumes for FCMP will be brought down by respectively 14,3% ( -5000 mt), 6,7% ( -2000 mt) and 19.5% ( -4500 mt). If prices move up during auctions where volumes are lifted, one wonders what’s going to happen when volumes are decreased.
Looking at supply & demand, the grand total of the most important milk production regions (China, India, EU, USA, Russia, Oceania, and Argentina) show a deficit of close to 3.000.000 tonnes or 0,5% compared to last year whilst consumption keeps growing. Most notably, China is reporting a milk production for the current year of -15 to -20% compared to last year. This has a direct correlation with beef prices that went up sharply by 70% at the beginning of this year which encouraged smaller farms to cull their cattle and withdraw from dairy. The reports mention a number of 2.000.000 that were culled. As replacement will take some time, there are reasons to believe that Chinese demand will stay strong in 2014.
Also New Zealand will be showing a deficit for the 2013 year. Up to September, NZ is 6,8% behind compared to last year. Mostly this has been caused by the drought in Q1 and Q2. But even if we assume NZ will achieve an 8% increase during Q 4, the sum total will still remain at a negative of 0,5% compared to last calendar year.
Once again the year 2007 springs to mind. This time however, the overheated prices seem to find their rationale in real demand and real supply issues, rather than the speculative forces that were at work in 2007.
Dutch Quotations 4th December 2013
product price ∆ price last week ∆ % one year ago
Butter 4120 unchanged - 18,70%
WMP 3770 30 ↑ 27,30%
SMP food 3300 50 ↑ 25,00%
SMP feed 3200 90 ↑ 26,50%
SWP 990 10 ↑ -2,00%
WHEY & WHEY DERIVATIVES
Higher WPC’s remain stable at prices around the € 7500/t. WPC35 short in supply. Prices firmer on the back of SMP increases. Lactose remains a problem with factories holding substantial stocks. Current pricing below € 900/t. Permeate in demand and availability thin on the ground. Prices are at about 70% SWP parity. SWP now traded at around the € 1010/t mark.
SMP firm. Skimmed Milk Concentrates firm at € 3050/t. Current pricing for SMP lies between € 3300 -€3450,-/t depending on origination and/ or final export destination.
FCMP stable to firmer. Prices between € 3770-3850,-/ton depending on origination and/ or final export destination. As a result of current buying interest from Russia and Algeria prices may go up.
SMP for feed remains static due to absence of substantial activity but can move quite brusquely when positions need to be covered. Feed grade SMP last traded at € 3320/t.
Caseinate pricing stable to slightly weaker. Availability is sufficient but export difficult. There are suggestions that stocks are too heavy and that the current level is double that of that of this time last year. NZ is reported to be selling Acid Casein well under € 8000/t for Q1 deliveries into EU. Converted into caseinate, this will be in strong competition to EU origin caseinate which makes it plausible that EU producers will seek to move inventories before year’s end. To facilitate that, pricing should go down.
Acid casein traded at levels around the €8100/t- €8350/t but quoted lower for Q1 delivery. Caseinate traded at levels of around the € 8300 -8900/t. Rennet Casein good availability and stable prices. Current price below € 8000/t.
LAST UPDATED : 4th December 2013
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