Market Update May 15, 2023

Hi everyone,

Welcome to the OpenDairy market update. It has been a dynamic week in which we have seen some specific movements and actions. 

This week we start at the basis of everything, the liquids market. While the majority of milk delivery by farmers is absorbed by cooperatives or private companies, there is a lively liquid milk market trading on a weekly basis. The liquid milk prices for fat and protein are an important indicator for the supply and demand balance in the regional milk markets. 

Last week we saw prices of raw milk of around 20 cents. The fact that this is roughly half the price of contracted volumes tells us that the liquid market was oversupplied. And, when producing SMP and butter, the butter return would already pay for the milk. This means the return of SMP would be pure profit. Are you still following? In the US we see the same situation, with liquid prices trading below the commodity equivalents. 

The past week we have seen the spot prices of raw milk increase to around 30 cents. This tells us that demand picked up from end users and processors. We are very interested to see how the milk output will develop, as spring has only just begun in Western Europe. The flush might be later than normal. But the first figures for March show that milk output is picking up, and components are on the higher side as well. 

The commodities market has shown a different picture last week. The week started quiet, but soon the action picked up. Prices picked up for butter and SMP, but not driven by any increase in end-user demand. Actually, many players were complaining about the lack of activity. At the same time, we saw some increased buying interest for feed grade products, as these were trading at large discounts against the food grade products. 

News from the exports markets is not very positive. Apart from a few tenders in the Middle-East, demand remains very mediocre. China still remains quiet, with local consumption disappointing and production very strong. At the same time, current prices seem to be workable on the global market. SMP and butter return is equivalent to the current farmgate prices and there seems to be little downside after the Northern Hemisphere flush. We expect a steady market ahead, but any unexpected events will probably have a bullish effect, not a bearish one. 

Thank you for your attention! Do you want to know the weekly prices we have seen trading at OpenDairy? Please sign up to our weekly wrap up as well.

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