Bearish Signals | What History Teaches Us

The past two weeks have been among the most active we have seen in dairy trading. Combined, we brokered over 6,000 mt of butter alone. Liquidity is abundant, volatility is high — but consensus is lacking. Q4 is traditionally bullish, supported by strong demand and lower production. Yet the market remains divided: many participants expect a bounce, while others view last week’s price drop as fundamentally justified. This week may prove decisive. Bulls can no longer argue that buyers are “still on holiday,” while bears risk facing an oversold market should Q4 demand reappear. With the GDT auction on Tuesday, participants will be watching closely to see if the market regains bullish momentum or if bears take full control.

Seasonal Context: September–December

September historically marks the beginning of the most active and volatile stretch of the year. If recent price moves are the “canary in the coal mine,” traders should brace for turbulence. In the last 5 years September until the end of the year have been mostly bullish!

• 2021–2023 and 2024 rallies: September through November brought surges of 25%+ in Gouda and butter. In 2021 butter prices rose from € 4000 up to € 6000 in December (before rallying to € 7000 in March). In 2023 prices rallied from € 4300 up to € 5600 in November and in 2024 prices jumped from € 6700 befor august to over € 8000 in October.

  Looking at the cheese (Gouda) we have seen 2021 rally from € 3000,- to over € 4200 in December. In 2023 we saw September take Gouda price from € 3400 to € 4200 and in 2024 from € 4000 tot € 5000.

• 2022 collapse: Conversely, butter fell from €7,000 in September to €4,000 in January, with cheese plunging from €5,000 to under €3,000.

Today’s early signs resemble 2022. In the past two weeks, butter fell from €7,000 to €6,100–6,400 (forward), while cheese dropped from €4,300 to €3,800. We understand the bulls logic to expect strong demand and bullish price movement as it is a more common move around this time of the year. But bear market usually come with a little warning... and looking at the signal, the bulls can't say they haven't been warned.

Bear Market Signals Emerging

1. Delays

We’re seeing structured delays across the supply chain. French bakeries, German butter repackers, Dutch cheese slicers, and German foodservice suppliers are pushing back contracted volumes.

• Double bearish effect: stocks build up with producers/traders, while demand on the buy side softens.
• Contracts are not cancelled but rolled forward, masking weaker end-user demand.
• Structural demand decline, combined with falling prices and an uncertain outlook, is amplifying buyer hesitation.

2. Stocks

Delays are directly inflating inventories.

• Butter: Stocks are smaller than in 2022, but production increases, weaker exports, and higher imports could lift levels toward those peaks. StoneX Plus (our preferred dataset for stocks) forecasts +115% stocks v.s. last year by year-end — a conservative estimate in our view.
• Cheese: Gouda age has stretched from 3–4 weeks to 6–7. Cheddar availability is ample, with prices sliding to just above €4,100 cheddar and below € 3800 for Gouda.
• Carrying cost pressure: Storage and financing costs are far heavier than in 2022. With EEX benchmarks still around €7,000, producers can hold — but if quotations fall further, financial controllers will push sales teams to liquidate we expect.

3. Widening Bid–Offer Spreads

As demand fades and stocks rise, spreads widen:

• Buyers are largely silent, often countering with “take-it-or-leave-it” bids.
• Sellers struggle to adjust offers downward, creating mismatches.
• Negotiating up rarely closes business; sellers who accept bids near recent levels secure contracts, those who hold out risk accelerating declines.
• This dynamic has already driven Gouda to €3,800 and butter to €6,100–6,300.

4. Discounts on Secondary Grades

In bullish markets, buyers tolerate minor defects with small discounts. In bearish markets, those discounts widen:

• More aged or off-grade stock surfaces.
• Buyers, seeing cheaper alternatives, grow more selective.
• Commodities purchased at a premium vs. spot face more claims as confidence wanes.

5. Other Usual Bearmarket Signals

• Trade balance: Imports rising while exports fade.
• Financial markets: EEX and CME show heavy discounts vs. spot (Q4 at –€600, Q1/Q2 at –€800).
• Macro/policy: Currency shifts and trade policy uncertainties (tariffs) add further pressure.

To summarise it all

The dairy market is entering a critical phase. While liquidity and volatility remain strong, alignment is missing. Historical precedent shows Q4 can deliver both sharp rallies and brutal declines.nEarly signals — structured delays, rising stocks, wider bid–offer spreads, and heavier discounts on second-grade products — suggest the market is leaning bearish. Carrying costs and futures discounts reinforce that view.

The coming weeks, particularly with the GDT auction as a benchmark, will reveal whether bulls can reignite Q4 demand or if the bear market takes full hold.

GDT: Testing Export Bearishness

This week’s GDT auction will serve as a key test of just how bearish the market has become. Our outlook is negative across all commodities, with expectations that the tender results will mirror the weakness we’ve already seen on the global stage.

Because, the market pressure is not limited to Europe. In the US, markets are also heavy: CME butter is trading at its lowest since December 2021, cheese production is at record highs, and inventories are building rapidly. US milk output is up 3.5%, and while strong exports are helping to absorb part of the surplus, they are also likely taking market share from both the EU and New Zealand. With milk production costs largely under control, both US and EU producers appear ready to continue milking even if farmgate prices weaken in the months ahead.

Butter and AMF

We expect both AMF and butter to trade lower. AMF may only register a modest decline, but butter faces more substantial downside risk. Using the Solarec EU price as a reference, we anticipate a 6–7% correction, taking EU butter from an average of €6,850 down to the €6,350–6,400 range. NZ product might see a softer decline, although the full market sentiment might drag prices for NZ product down as well.

Cheese

Mozzarella has already corrected sharply in recent weeks. If the tender aligns with recent physical trade, we expect another 3–4% decline, bringing prices to €3,600–3,700. Cheddar is likely to follow the weaker sentiment in both the EU and US, with prices expected to break below the previous tender results.

Powders

The powder market has not shown major movements, but it remains firmly bearish. We expect:

• WMP: down 1–2%
• SMP: down 2–3%

European SMP, which held at ~€2,350 at the last auction, could easily slip below €2,300 if the bearish tone continues, with risk of losses extending beyond 3%.

Summary

This week’s GDT is shaping up as a test of whether bearish fundamentals — oversupply, heavy stocks, strong US exports, and subdued demand — will fully translate into auction pricing. We expect broad declines, with butter leading the downside, mozzarella continuing its correction, cheddar slipping further, and powders easing in line with global sentiment.

Butter: Testing €6,000 This Week

Butter has been in rapid decline since trading resumed on 18 August. Our first brokered contract that day cleared at €6,800 for Irish butter (Aug/Sep and Dec/Jan positions). By last Tuesday, we transacted 308 mt of Irish/Danish/Swedish butter for Dec/Jan at €6,650. On Friday, the slide accelerated, with 132 mt of NL/DE/BE butter for Q4 trading at €6,300, and Q1 positions concluded at €6,175.

The €6,000 level now looks critical. A further drop of €200–300 could re-open export opportunities (provided GDT does not collapse) and test a strong psychological barrier.

Quotations Under Scrutiny

EU quotations once again sparked heavy debate last week. Producers continue to defend them by arguing that quotations are not designed to follow the trader’s market. Traders, however, strongly disagree, pointing to the significant gap between official quotations and the physical market they are transacting in (also with these same producers).

The frustration is particularly acute among those carrying hedges or buying against quotations. For these participants, the disconnect creates a deep sense of unfairness — quotations that lag reality distort risk management and leave buyers exposed to levels far from actual trading conditions. That said, we expect quotations to balance out this week.

• Dutch Quotation: Last week’s €6,820 level provided a fair reflection of the market, aligning with physical trades. If the trend continues, we expect this week’s Dutch quote between €6,500 and €6,600.

• German Quotation: The German benchmark last Wednesday surprised to the upside, averaging €7,050 despite multiple sales being reported at €6,700–6,800. With German producers now actively chasing bids at €6,400–6,600, we expect a sharp adjustment lower — around €400–500 this week.

• French Quotation: No quote was issued last week, likely due to subdued summer activity. However, factories are now reported back in the market, selling between €6,500–6,800. We would expect the French average to fall into this range, dragging the EEX average lower by roughly €350.

Outlook

Such a move in quotations, in an already weak market, could bring a direct test of the €6,000 level. That said, after last week’s sharp drop, some stabilisation seems likely. We expect butter to consolidate between €6,100 and €6,300 in the near term, with offers opening accordingly.

We expect to open with the following offers:

• 88mt of NL/DE/BE butter for September at € 6400
• 88mt of Polish Sweet Cream butter at €6550
• 132mt of NL/DE/BE butter for Q4 at € 6350
• 132mt of Irish butter for Q4 at € 6250
• 132mt of NL/DE/BE butter for Q1 at € 6175
• 132mt of Irish butter for Q1 at € 6150
• 132mt of NL/DE/bE butter for Q2 at € 6200
• 132mt of Irish butter for Q2 at € 6150

Cheese: Weaker, but less active

For us the cheese market feels weaker as well, although the number of sellers activlty trying to sell via us is much smaller. Speaking to the sellers they all say the same thing, demand almost feels non existing.

Gouda

The Gouda market continues to soften, with sellers now openly willing to conclude business at €3,800 for September. What is particularly telling is that the same level is being offered not only for nearby delivery but also for Q4 and even Q1 positions, as sellers actively look for bids. The willingness to sell forward at such levels highlights the lack of confidence in any near-term recovery. Instead of holding out for better prices, producers and traders appear eager to clear stock, suggesting further downside pressure if bids remain absent. We can offer roughly 3-4 loads a month for the next 7 months forward at € 3800.

Mozzarella

Mozzarella also shows clear signs of weakness. Deals last week concluded at or just below €3,750 for September deliveries, with more sellers expected to appear at this level for both Q1 and Q2 positions. This signals that sellers are aligning across the curve, reflecting not just a temporary adjustment but a broader acceptance of lower price structures. Without any signs of demand recovery, the €3,700–3,750 band risks becoming the new market reference point where we expect to find sellers for the next month ahead

Cheddar

Cheddar looks even more fragile, with demand proving difficult to find. Buyers are largely absent, and those in the market report purchases closer to €4,100 for UK/Irish products. Sellers, however, continue to claim transactions at higher levels around €4,350 — but the credibility of those claims is increasingly questioned. The lack of liquidity, coupled with buyer reluctance, points to a market where sellers are chasing business rather than defending price levels.

Downgrades and Spot Demand

Adding to the bearish tone is the growing availability of downgraded product. As we do not think this is a product we should broker, we can't offer any. These lots are losing value quickly, with buyers exploiting the oversupply and becoming highly selective. Meanwhile, demand for cheese intended for melting in the spot market is, as are all products, weak, further eroding support for secondary grades. With weak fundamentals, wide bid-offer gaps, and an absence of strong end-user buying, the cheese complex looks set for continued pressure in the weeks ahead.

Powders: Boring But Bearish

Regular readers might expect us to end on a more optimistic note, but as highlighted last week, the bullish outlook simply isn’t materializing. Trading remains largely sideways, though it increasingly feels like we are drifting on a downward slope. Sellers are still hoping for a rally, but the question remains: where would the necessary demand come from?

The powder market is facing the same dynamics we see in butter and cheese — higher production, more supply, and weaker exports. Against this backdrop, it is difficult to justify a bullish case. While some argue that prices are already close to historic lows, that does not prevent the market from retesting levels below €2,000. With milk availability rising globally and demand growth limited in the major importing countries, upside expectations seem based more on wishful thinking than fundamentals.

For SMP, the market continues to revolve around the bid–offer gap. Offers remain around €2,300+, while bids sit closer to €2,225. The standoff reflects both buyer hesitation and seller reluctance, but with sentiment leaning bearish, the pressure is clearly on the offer side.

Non-standardized material is trading at a premium of roughly €100 over standard SMP, but even here, the tone is cautious. With no strong demand-side drivers and global supply continuing to expand, powders remain exposed to further weakness, making a test of lower levels a realistic possibility.

Conclusion

The dairy market is heavy across the board. Butter is testing €6,000, cheese sellers are chasing bids well below recent benchmarks, and powders show little reason for support. With delays, swelling stocks, and quotations increasingly disconnected from physical trade, sentiment is leaning firmly bearish. The GDT auction will provide a crucial signal this week — but unless demand surprises, the bear looks set to stay in control.