SMP
US prices are dropping swiftly
Europe
Exchange rate is a game changer
The EU SMP market found itself in a sudden turmoil with last week’s swift appreciation of the Euro vs the US dollar, as this terminates the EUs competitiveness in the export markets from now on. Overall, the EU SMP market is quite thin and because of the uncertainties all players are hesitant to enter into further forward transactions. There is some stability right now but the balance is feeble. The current market price is EUR 2475 ex works, which means that in Euro terms the price is about 4% below our February quote, but in US dollar terms – which is used in the graph – it has not changed. Demand on the whole is good enough, also for nearby delivery dates, but buyers stay closely tuned into the market developments because of the overall economic and political situation and continue to buy hand to mouth.
Americas
US origins almost as competitive as EU origins
EU product still wins most of the export business but the US is about ready to export on equal terms. The current weakness of the USD is only one of the factors that brings US SMP almost on par with EU prices. The silence on the Mexican market is another major factor that pushed prices further down throughout February. Medium heat SMP is now trading at USD 1.18/lb (2600/t) and the spread with NFDM that currently trades at USD 1.21/lb (2670/t) has narrowed. Both prices are ex works. Recent developments suggest that the trade dispute with Mexico has de-escalated but it goes without saying that future events between the US and Mexico will be crucial for the NFDM market balance and possibly even the global protein balance.
Asia-Pacific
Relative price stability, but for how long?
At the current price of USD 2950 FOB Oceania SMP is not really competitive in several export markets. That the price on last week’s GDT held its ground quite well is also the result of lower volume on offer. Outside of GDT China has not been buying a lot of SMP, even though the local milk production is allegedly not great. Several new SMP processing facilities in China will start processing local milk and this will further reduce China’s dependency on imported powders, in line with what had happened in the past years with FCMP. Further noteworthy is the fact that the Middle East appears to have fully replaced Oceania SMP for EU powder in the past weeks as a result of favorable prices for EU product. Overall, the APAC market keeps a close eye on the events in the US and the consequences these may have for export flows.
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