CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
Dairy Demand Defies Yuan Drop; WMP-SMP Spread Drives Prices
Dairy Markets Shrug Off Currency Pressure
Key Takeaways:
- Chinese physical dairy buyers maintain demand despite the yuan hitting significant lows amidst broader emerging market currency pressure
- $1,000 spread between whole and skim milk powder drives market shifts
- Chinese importers scramble to cover positions as local stocks tighten
Physical dairy buyers aren't backing down, even as the value of key currencies tumble. The latest Global Dairy Trade auction saw whole milk powder hold near $3,950 per ton, defying expectations of a selloff.
"Each region showed buying interest, even at these higher prices," says YiFan Li, StoneX's VP of Dairy for Asia on the latest Heard Mentality podcast from the StoneX Dairy Team. That was an unexpected development, given the Chinese yuan just hit historic lows against the dollar.
The buying stems partly from tight supplies. Chinese importers who sold forward are now scrambling to cover positions as local stocks run low. From February through October, China's powder imports dropped steadily below last year's pace. That didn't stop domestic prices from holding stable however.
A curious split has emerged between derivatives and physical markets. While futures traders took profits ahead of the auction, sending SGX prices lower, hands-on buyers kept bidding. The divide highlights a key market dynamic – speculators may move in and out, but end users still need the product.
The spread between whole and skim milk powder tells another story. At $1,000 per ton, it's pushing more Middle East and African buyers toward alternatives. European producers of fat-filled milk powder saw exports jump 22% in September as buyers adapted.
Looking ahead, Li and team see whole milk powder likely staying under $4,000 in early 2024, assuming normal New Zealand weather. Further, Chinese buying could slow as domestic production picks up ahead of their New Year, then bounce back by March.
The market's holding up better than many predicted. But at these levels, both Chinese and Southeast Asian buyers face tough decisions. Some smaller Chinese users have already switched to domestic powder. Others may follow if prices stay high.
Listen to the full podcast episode below:
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CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
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