Butter Taking a Break? Or Butter Breaks?

Yesterday we saw the market trade significantly lower for butter. Driven by lower cream prices, cheaper Polish butter appeared, dragging down the sales prices for NL/DE/BE butter as well. Meanwhile, the GDT showed a steady outcome with butte prices still well above € 6000,-. SMP prices traded sideways and didn't show the upward momentum we expected. We are a bit puzzled about the market as prices keep trading up and down without any clear change of fundament. 

The GDT posted a 0,1% increase with the biggest increase on AMF. We finally have a realistic gap back between AMF and butter prices and it showed demand for fat is still strong. Butter prices did trade down a bit but are still well above the price of € 6100,- or $ 6500,-. The upward momentum spread to the US as well, showing higher trades on the CME. Only the EU market remains unaffected and is trading significantly lower for butter.

WMP prices also moved up, although the price action is nothing spectacular. It underlines the story about good demand for fat products. SMP prices remained unchanged although it seems EU prices have mood up a bit. Overall the result confirms a market that doesn't show a lot of movement to either the up or downside.

Liquids: Weaker

The EU market does feel weaker. Higher availability of liquids is pushing on some regions' prices like SMC and Cream further down. SMC prices are reported as low € 1350,- and it seemed there were still more sellers and fewer buyers. Cream prices dropped down to € 6500 and we even got feedback some trucks traded € 6400. At these prices, Polish producers seem able to produce butter below € 5600,-. It does help the Polish that their currency is weakening, which is helping exports out of Poland. Raw milk prices are dropping below 40ct again. Poland and Germany seem to be driving the higher milk intake. It seems France is dropping back below last year's milk collection again and the Netherlands and Ireland also keep lagging. Denmark seems to be on par with last year.

Butter: Break or just a Break?

The butter market traded significantly lower compared to the last weeks. In all honesty. it does come as a bit of a surprise to us. Last week Q2 prices traded as high as € 6050,- and yesterday Q2 prices traded as low as € 5665,-. Lower prices for Polish butter are dragging down prices for Western EU products, although for now it only seems to be traders selling lower. The situation for the Irish remains unchanged, and with offers at € 5950, we don't see the lower prices coming out of Ireland just yet. Also, most German producers don't want to follow, claiming sales still well above € 5900.

We understand the Valio tender of yesterday also still concluded above € 6000,- and Solarec butter on the GDT traded at € 5900,-,. The question we ask the market, is the butter market really breaking down, or are we seeing butter take a break? Without any new market fundamentals and a world market that still shows mainly bullish signals, we would see the current market as a short momentum of lower prices, and not a new trend. But it might also be our market-biased view as we have been bullish in our previous reports.

We start the day with

• a bid for 12 trucks NL/DE/BE fresh/frozen at € 5750 for Q3
• a bid for 6 trucks May/June at € 5625 for NL/DE/BE fresh/frozen
• a bid for 12 trucks NL/EE/BE fresh/frozen at € 5900 for Q4
• a bid for 6 trucks Polish Sweet Cream for May/June at € 5500

We have no sellers who followed the downtrend. Our best offers remain much higher than te expected prices from the traders. Our best indications are now:

• May/June NL/DE/BE fresh/frozen € 5730
• Q3 NL/DE/BE fresh/frozen at € 6000
• Q4 NL/DE/BE fresh/frozen at € 6100
• April / May Polish Sweet cream € 5700

Powders:

Looking at the powder market its seems our market view (and that of our partners) keeps swinging from left to right and from bullish to bearish. The lower SMC prices give a bearish sentiment as for extra products the market doesn't seem to be able to find a buyer in April or May. But looking for further out we have a harder time finding sellers as the market outlook is very uncertain.

Production numbers from the US show again a lower production of SMP/NFDM for the first 2 months of this year, but CME prices keep trending lower and lower. It feels the big players realize there is little risk in buying H2 this year at relatively low prices, so demand for further out is ok. But as prices for closeby can't find any liftoff, buyers won't pay a € 300 premium or more.

Our market remains roughly the same with buyers for:

• 300mt of Solarec smp for June/July at € 2325
• 750mt of Solarec smp for Q4 at € 2600
• 450mt of Barry Callebaut spec BigBags for Q3 at € 2420
• 450mt of Barry Callebaut spec BigBags for Q4 at € 2500