Market Report 30-3-23 Is the lowest point reached?
The 7th week with stable prices.
Another quiet week with stable prices, only butter and skimmed milk powder declined.
Cheese prices were mixed. As predicted, demand was good, and prices are stable/rising. The industry and trade waited until the last moment to sign new contracts in the hope that prices would still fall. It seems that the bottom has been reached and now everyone needs goods within 24 hours. This tends to lead to rising prices.
I do not expect a price rally, as demand in China has not yet picked up. If it was the zero COVID strategy before, it is now the slow economy. China is hit by both the cooling economy in the West and the tendency of many industries to try to become less dependent on China. Both are homemade, the zero COVID strategy led to supply shortages and fuelled inflation, subsequently the West raised interest rates and slowed growth and these supply shortages also led firms to seek alternative suppliers.
China's current behaviour will not reverse this trend. It will take time, money, and political rethinking to regain the lost trust. I therefore expect little positive stimulus from China in the coming years.
Important note to all producers and traders:
This winter, many competitors have tried to copy our products. We are happy about this, as it shows that we are on the right track.
Before you copy us, ask us for a cooperation. We are always looking for producers who want to make cheese for us and we are always looking for distribution partners.
And in Switzerland?
Milk prices are still stable at a high level. The milk price monitoring of the Swiss milk producers reports a record price for January 2023.
I quote " The standard producer price in January 71.76 Rp. /kg. This was 0.39 cents/kg more than in the previous month and 7.40 cents/kg more than in the same month of the previous year. The average of the 12 previous months in January was 69.86 centimes (6.88 centimes/kg more than in January 2022)."
Mooh the largest milk trader forecasts a price increase of Fr. 0.08 or 13% for August. Mooh's forecasts are usually quite accurate. It could be that you will never again get Swiss cheese as cheaply as now.
Read our report on cheese exports with the latest February 23 figures: https://www.affineurwalo.ch/en/news/swiss-cheese-winning-model
On the question: Is the lowest point reached?
My forecast: stability until June.
We have two opposing trends now: Thanks to lower energy costs, manufacturing costs have gone down. This can lead to one or the other manufacturer slackening off a few cents. On the other hand, stocks are low at the manufacturers, the processing industry, and the trade. This means that demand is good and there is little pressure to sell. This tends to lead to rising prices. I assume the two trends balance each other out.
If the predicted supply shortage occurs from July onwards, there will probably be a big demand. I would prepare for this scenario; in the worst case you have a bit too much capital blocked in the warehouse. You will easily recover these costs if you can deliver more flexibly.
Kind regards, Affineur Walo
