Analysis Commodities
Mozzarella surges rapidly on Global Dairy Trade
The improved sentiment in the dairy market is not fully reflected in the first Global Dairy Trade of August. Prices of butter and skimmed milk powder are mutating downwards. Mozzarella, however, takes a big step upwards, which is not entirely unexpected.
Mozzarella rises by a whopping 8.4% to $4,580 per ton, reaching its highest level ever. It should be noted that this product has only been traded on the GDT for two years. Nevertheless, the increase reflects a strong global demand, as has been noticeable in the physical market in Europe for some time.
Less mozzarella produced
There is a logical reason for this, as the price of mozzarella in recent months was somewhat undervalued compared to other soft cheeses such as Gouda and Edam. Consequently, insiders suggest that fewer large volumes of mozzarella have been produced, resulting in tightness in supply. The imbalance between mozzarella and other cheeses has, however, been restored. It is likely that mozzarella prices will continue to rise in the coming weeks as long as the tightness persists.
Cheddar, the other cheese traded on the GDT, experiences a much calmer price increase of 1.3%, reaching $4,275 per ton and thus being cheaper than mozzarella.
Significant gap in the butter market
The other major dairy products traded move in smaller increments compared to mozzarella, with price changes not exceeding 3%. This is in terms of delivery contracts for September. A notable 2.4% decrease is seen in butter, bringing the price back down to $6,489 per ton. The October contract even shows a 5% decline. This is likely due to the production season in New Zealand picking up pace, leading to expectations of larger volumes from Oceania. The increasing production is also reflected in the traded volume at this auction, which was almost 10,000 tons higher than three weeks ago at over 30,000 tons.
Butter, offered by the Belgian Solarec, was traded today for almost $1,500 per ton more expensive. This price difference is unusually large and is unlikely to be sustainable in the long term. The question arising now is on which continent butter prices will rise or fall in the coming months to reduce the imbalance. In Europe, the butter market feels quite tight due to limited stocks and prices seem to be on course for new records for the time being.
Inconsistent milk powder market
The milk powder market is not consistent in its movements. Skimmed milk powder decreases by 2.7% to $2,539 per ton, while whole milk powder increases by 2.4% to $3,259 per ton. This marks a turnaround after four consecutive price decreases. Skimmed milk powder continues its downward trend, reflecting the weak sentiment in the physical market in Northwest Europe.
