The Algerian buying agency, Office National Interprofessional du Lait et de Produtis Laitiers (ONIL) has issued a new tender for Skimmed Milk Powder (SMP) and Whole Milk Powder (WMP), for delivery in January, February, March, and April. ONIL tenders continue to be a key indicator for international demand, because Algeria is one of the leading consumers and importers of dry milk powder worldwide. Following the news of the tender, future prices on the EEX saw a bullish impact. However, as of today, the size of the tender remains uncertain, because ONIL has not yet released this information. The short ETA, however, could indicate that domestic stock levels are starting to run low, and that demand could be bigger than anticipated.
News of the tender caught the European dairy industry off guard, as market participants across the EU thought that international demand would not return before the middle of Q1 2023. The tender has created concern in the market, because several traders took short financial positions in November, anticipating further price declines.
One market source stated, “We expect that WMP will likely be covered out of New Zealand or South America again. They simply have too much of a cost advantage compared to the European price level. How much this will impact the EU SMP market will become clearer in the coming days, maybe a week. We need to know how big the tender is, we need more information. However, the market is extremely nervous.”
A second source commented, “Many traders across Europe are short on their SMP positions and we have already seen a slight bullish impact. In addition, we have started to see more activity out of China since the end of last week, with more buyers monitoring the market. We anticipate that this ONIL news could bring the powder market back to life, as this could spur a nice short-covering rally.”
