Soummam, Algeria’s largest private buyer, has returned to International dairy markets. Following several quieter weeks of limited domestic and low international buying interest in the milk powder markets, with decreasing prices, skimmed milk powder (SMP) prices stabilised over the past two weeks, as buyers started to cover some Q4 volumes at the current low prices.
The current low-price levels and the uncertain market direction are also closely linked to the return of Soummam to the market. The company announced a new milk powder tender for a combined 12.5k mt, 5,000 SMP and 7,500mt whole milk powder (WMP). The tender is expected to close on 18th September and delivery is expected to start in Q4.
Soummam has limited the origins of this tender, and accepted origins for SMP are Belgium, France, Ireland and the Netherlands. The initial bids for SMP are reported to be between €2,250-2,350/mt CFR Algeria. For WMP, accepted origins are New Zealand, Argentina, Uruguay, Ireland and the Netherlands.
It is too early to know how the tender will impact international markets, and market sources reportedly have contradictory opinions on the market direction following the announcement. Some expect this to be the beginning of a buying spree, with several key international consumers returning to the market and covering large volumes of Q4 demand, which will likely result in a price increase for SMP in Europe. Others believe that this will only be a smaller wave of buying returning to the market, and with stock levels across Europe ample, price levels will likely remain unaltered for EU SMP. The WMP market is quite similar; however, with international producers able to offer at lower price levels, it remains uncertain how much WMP volume will be covered by EU market participants.