Intervention SMP – EU Commission holds out for market price
353,555t of SMP are currently in EU intervention stocks, and there is no denying that its very presence is affecting the market.
However, the EU Commission in the December tender (only 42t out of 22,000t sold at prices above €2150/t) and in the January tender (zero tonnes sold out of the 22,000t because no bid exceeded €2000/t) has proven its determination to avoid disrupting markets.
In his report for CLAL, Herr Richarts suggests that the downturn in EU milk production could reduce fresh SMP manufacture by 240,000t, by more if milk is diverted to cheese and WMP. He is clear that there is “no hurry to sell”, referring to the experience of successfully disposing of SMP stocks without damaging the market recover in 2009/10.
Import demand to remain strong in China – Rabobank
Rabobank, in their monthly China Food and Agribusiness Report, state that, despite increases in domestic milk prices which should lead to increased home produced milk volumes, faster growing demand will continue to rely heavily on imports.
They predict a 20% increase in dairy imports for 2017.
On the demand front, the CLAL report suggests that, while domestic EU market demand will only grow modestly, mainly in the cheese sector, during the year, demand will continue to grow in third countries importing dairy products from the EU – even allowing for the increased prices.
On dairy prices, Erhard Richarts for CLAL also predicts a “stable to firmer” evolution of dairy prices over the next number of months, with possible further increases in butter, and a more stable trend – but at “elevated” levels for protein and powders.
EU dairy prices continue strong
EU MMO figures for dairy commodity prices to week ending 8th January shows a slight easing of (very high) butter and WMP prices, a slight increase in SMP prices (despite overhanging intervention stocks), and a continued firming of whey powder prices.
Looking back to the full year 2016 and into the early days of 2017, it is clear that, from May/June, prices of all commodities started to rise, with very strong evolutions for butter, cheddar cheese, WMP, and whey powder, and more modest, though significant increases for SMP.
In this one year period, butter prices rose by over 44%, SMP by 23%, WMP by over 34%, Cheddar by over 15% and whey powder by 55%. The Dutch commodity cheeses Edam and Gouda increased strongly, by 28.6% and 26.3% respectively.