SMP
Strong supply in all major export regions
Europe
Abundant supply makes life easier for buyers
The EU SMP market has taken a step down, because of the abundance of milk that needs to be processed. The EU is now even the cheapest origin of the three main export regions that we track in this report. At the current market price of EUR 2150 ex works the doors for exports open and close on the tide of currency fluctuations and further depend on the specs and transport distances. For nearby delivery there is more supply than demand and most of the buy side has taken the opportunity to improve their forward coverage. Ramadan buying, for instance, has already largely been done.
Americas
The sentiment is actually weaker than the current price reflects
Hard data are lacking because of the government shutdown but production of NFDM must be higher than 12 months ago. Nevertheless, there is no direct pressure on the supply side, since we are in the low production period anyway and milk powder continues to find its way to the end users. The market price has trended down to about USD 1.16/lb (2555/t) ex works. Even though MH powder trades at a discount of USD 6-7cts/lb it is not really competitive on the export markets, and the deals that do materialize into Asia will generate low returns. After October US milk supply will begin to grow seasonally and at the current costs and returns at farm level there is no way of stopping the milk from flowing unless disease or weather create serious disruptions.
Asia-Pacific
Market is well balanced
The SMP market in Oceania is relatively tight, after good sales for Q4, which allows suppliers to do some cherry picking. MPC production is attractive because of good valorization and this keeps the volume of SMP in check. At the current price of USD 2650-2700 FOB there is sufficient demand from buyers that prefer Oceania origin for various reasons – FTAs, duty exemptions, short transit times or specs. Other, more price-driven, APAC buyers, are beginning to look at EU product, but they mostly maintain a short buying horizon. Going forward there is sufficient demand in the region, with China coming back to the market after Golden week, to withstand the downward pressure from EU and US product.
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