“So with all this powder demand and less production of NDM through July, stocks would be falling in dramatic fashion, right? Not so,” Meyer says.
USDA is reporting NDM stocks to have fallen by just 11.9 million pounds (down 5.9 percent), much less than the prior four-year average decline of 16.1 percent. However, stocks did increase between July and August in both 2007 and 2008. 2007 is notable because international prices for NDM spiked in May to $5,000 MT and remained at or above those levels through mid-October that year. Oceania SMP prices peaked at $5,450 MT ($2.47 per pound) in August 2007 and US monthly NASS prices topped out at $2.06 per pound in October that year.
“So while it is not unprecedented to have increasing stocks with increasing prices in August, we are surprised that inventories are not declining at a more rapid pace given how high they have been this year,” he writes. “Perhaps extreme price levels for NDM has caused some pushback on domestic demand.
“We anticipate this market will continue to be supported by the conditions overseas, but once supply and demand are back in balance for SMP, we can make a case for a solid downside price retracement here in the states,” he concludes.