Following bearish sentiment in January, strong buying interest resulted in a price rally on the European Skimmed Milk Powder (SMP) market in early February. Buying interest from multiple sides of the market returned, and traders needed to cover short financial positions. Food manufacturers and international buyers covered short-term demand for Q1 and early Q2 2023. While this strong buying interest caught many market participants off guard, sellers quickly moved offers off the market and reduced supply on the spot market, even though stock levels for SMP across the EU remain high.
After the strong increases in the first half of February, market activity reduced in the second half of the month, with prices stabilising over the last week. It remains uncertain if this is linked to buyers fully covering demand and stepping off the market, or simply reduced market activity due to the Gulfood Exhibition, the largest food show, which resulted in several key buyers being off the market to attend the event.
International markets also remain mixed, as buying interest from both Asia and Africa is difficult to anticipate, according to multiple market sources. Chinese demand has remained limited thus far in 2023. However, as soon as the prices drop below €2,250/mt, Chinese buying interest is likely to return to the market. It remains uncertain how big Chinese powder stocks are, but unlike WMP, SMP stocks appear to be running low. One market source commented on the Chinese market, “we have heard that Belarus has started to offer at competitive levels to Chinese clients at around $2,350/mt EXW Belarus. However, we are uncertain what volumes may be exported to China.”
Buying interest from Africa and the Middle East is also uncertain, even though Soummam closed a dairy tender in early February. Multiple market sources have indicated that ONIL, the Algerian buying agency, is again in the market for milk powders, but volumes and delivery dates still remain unknown.
For reference, the MBP for Skimmed Milk Powder EXW Europe [Mintec Code: J117] was assessed at €2,600/mt on 23rd February, unchanged on the week, but up 8.3% (€200/mt) compared to the last assessment in January at €2,400/mt.
