Market Update - January 20, 2023

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Hi everyone,

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Welcome to the OpenDairy weekly market update on this friday the 20th.

We look back on a dynamic week in both trades and events. Tuesday we have seen a stable GDT, contrary to what most of the market was expecting.

The general consensus in the market pre-gdt was that Chinese activity would still be weak and therefore we would see lower prices in the auction. The first part of that statement proved to be correct, Chinese activity was still very limited. However, other markets decided to benefit from the lower commodity prices and step back in.

A bullish question could be: "what would happen if China steps back in as well?". We believe we don't have to expect any miracles from China, as local demand is still very weak. There are even reports of milk being dumped due to the lack of outlets. And if China is not buying, it'll be hard to give the story any bullish twist.

Dairy commodities have dropped off a cliff the past weeks and we start to see a difference between protein and fats. Cheese and butter are still seeing downward pressure, protein in the form of SMP seems to hold a bit better. Farmgate prices are being corrected by big cooperatives, but the gap between the current farmgate price and the spot price is more than 30 cents. Still a long way to go until farmers have any incentive to slow production.

This week, a Dutch newspaper reported that dairy farmers were able to generate a comfortable income in 2022 of almost triple the average of the 5 years before. We hope 2023 will be just as good for dairy farmers around the world, as we will need every single one of them to meet the growing global demand. For now, we expect a strong milkflush in the Northern hemisphere and plenty of milk available. But the supply correction could be just as drastic as the price drops we have seen until now. We will keep you posted!

Thank you for your attention and have a great weekend!

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