Largescale SMP stock disposal may presage stronger powder markets in 2019
Just over 203,000t of SMP were sold out of intervention stock this year, with minimum sales prices edging up slightly from July. Latest minimum sale price, at €1251/t, are €100/t or less below the quoted price for fresh feed grade SMP.
Source: IEG Vu based on EU MMO
Feed SMP spot quotes from France Agrimer for 24th October was €1248/t; PZ quotes for the Netherlands were €1390/t on 14th November, while Kempten (German) quotes for the same day were €1330/t.
We estimate that around 170,000t of SMP are left in intervention store, which is still a significant amount of stock. Also, some analysts report that at least some of the tonnage sold out of intervention could still be in (private) stock as opposed to utilised in the market place.
Even allowing for this, there will be at least 2 more sales of SMP out of intervention by year-end, and real scope for further sales next year as demand from calf milk replacer manufacturers rises in spring.
Current fresh food-grade SMP prices, based on latest EU Milk Market Observatory reports dated 4th November, have edged slightly up at €1580/t. Futures markets for the last few months have consistently suggested SMP prices into 2019 trending towards €1700-1800 in 12 months’ time. Not a very exciting price, and in fact just over intervention buying-in prices, but well up on current levels.
While the price trend for butter and butterfat has been down, while remaining at historically strong levels, we would be hopeful of a rebalancing of the SMP/butter price relativity sustaining reasonable returns into next spring. Of course, this depends strongly on global output trends (see below).