SMP/NFDM
Prices show remarkable convergence in the three main production regions
Europe
Price recovery atypical for July
The EU SMP market is a little shaky. The heat waves that hit the European continent in June and July are tempering EU milk production volumes. This has been tightening the EU market for SMP at a moment that it normally loosens seasonally because of the summer holiday period. Production during Q2 has been strong but the overall stock levels of SMP in the EU are limited. The price in Oceania is dropping and even in the US the price spike of Q2 has come to an end. Competition for export business may therefore heat up going forward and it remains to be seen if this will force EU prices down going forward. The current price level for EU SMP shows quite a broad range at EUR 2700-2850 ex works, with the lower end applicable to older product that does not qualify for export and the top end relating to premium quality. Insecurities are not becoming smaller going forward with the situation around the Hormuz strait becoming more volatile again.
Americas
Thin market with strong downward price momentum
Prices in the NFDM US market are volatile as trade volumes are thin. Buyers are not stepping in as long as prices continue to fall and sellers do not consider the current CME price of USD 1.47/lb realistic. Most transactions that do take place materialize at a level of USD 1.53/lb (3350/t) ex works. This still implies a 30% price drop compared to early June levels. The decline appears mostly demand driven since exports were down considerably in Q2 due to US prices not being competitive in the world market. The next 4-6 weeks are traditionally slow as well as Mexico tends to be absent in the summer period, but upside price risk after this period seems material. Not because US milk production shows signs of weakening but because cheese and liquid skimmed milk remain the preferred destinations. Availability of powdered formats is therefore still constrained and stocks are low.
Asia-Pacific
Oceania is becoming more competitive
Oceanian SMP prices have come under pressure as Q3 volumes on offer on GDT have been increased. Production in New Zealand in the shoulder of the season has been relatively strong and expectations for the start of the new season are favorable. Demand from China remains subdued, and while most buyers across SE Asia appear to be largely covered for Q3, Q4 order books are still showing empty spots. Being more competitive on the world market should help Oceania suppliers generate export demand to absorb the increasing seasonal production volumes in the months ahead. The current market price outside of GDT is about USD 3250 FOB NZ.
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