Closing the Gap

Latest milk intake? Let’s just say the numbers are not exactly uplifting. Farmers in France, Germany, and Holland don’t seem too motivated to ramp up production, nor do they expect to be, at least not anytime soon. Even they seem to see what’s coming with only one look at the futures: a turnaround driven by the end of heavy backwardation. So why should they boost in milk production? Well, maybe Q2 they will if prices will remain firm for a longer time, but don’t count on January.

This backwardation game relies on two things: stronger milk intake and weaker consumer demand. And on the latter, it’s not as bleak as some might have you believe. Retail-supplying buyers are still making last-minute grabs for extra cheese and butter volumes, making tight-market sourcing a real circus. It’s dawning on more folks that expecting a new dynamic to magically start on January 1st might be wishful thinking.

Liquids: Sideways

Cream prices, expected to climb, are stubbornly stable. We’re hearing quotes as low as €9,800 and as high as €10,200—essentially last week’s range. This likely means fresh butter production will remain at a minimum unless buyers cough up €8,200. Spot milk’s stuck at around 60 cents, and only SMC shows a hint more demand, trading roughly €50 per MT above last week’s lows.

Butter: Q1’s Rising

November butter prices? Flat as a pancake. NL/DE/BE butter is available between €7,700 and €7,850, with Irish butter showing a slight upward nudge. Early-morning trades on Irish butter started at €7,350 FCA Ireland, closing at €7,550 FCA NL. Danish butter’s tagging along with Irish, while sweet cream prices hover between €7,600 and €7,700.

But the real action is in Q1, where EEX futures hit €7,275 yesterday, marking a €250 jump from last week and the highest level in nearly five weeks. After a brief spell of willing sellers, offers are thinning out, yet buyers remain relentless. With November/December prices hovering above €7,500, nobody’s rolling over stocks from 2024 into 2025. Even end-users are buying lean, with demand in January predicted to match December’s strength, likely keeping January prices level with or slightly above December’s.

Looking ahead, can November and December prices climb higher? Outside of specific origins or ultra-fresh butter, probably not. We expect flat trading to today’s prices (maybe a smidge up), but without any Q1 sellers stepping in, Q1 prices could keep rising until there’s a good reason to move Q4 stock forward.

Cheese: Flattening the Curve

Yesterday brought a bit of a cheese shuffle—mainly some buzz around Mozzarella for November and December. A modest 200 MT moved at an average of €4,225, and for Q1, the tables are turning: sellers now want a premium instead of a discount. They’re asking themselves (and the buyers) why they should be lowering prices for Q1 without a crystal-clear rise in milk intake. Seems like wishful thinking.

As for Gouda, the buyer-seller gap is growing. Buyers are aiming lower and lower, while sellers are holding firm. Case in point: November bids are landing at €4,300, but offers are holding steady around €4,600. Q1 looks similar to November/December on the buyer side, yet sellers are stepping back, waiting to see if the rising butter prices in Q1 have their expected effect.

We’ll be kicking things off with the following offers...

Powders: Gaining Some Momentum

Even the powder market’s starting to show a pulse. No fireworks yet, but bids and offers are edging closer, suggesting potential trades might not be far off. There’s a flicker of increased interest in FCMP, SMP, Non-Standardized SMP, and BMP, though we’re still seeing plenty of offers on the table. Our partners, however, are starting to feel a tad more optimistic. Demand from Mexico for SMP, Southeast Asia for SMP and BMP, and internal feed industry interest in Non-Standardized SMP are welcome blips of positivity.

On the export front, demand from the Middle East is holding steady. Over at GDT Pulse, trades for SMP and WMP have inched up compared to the last round. With these undercurrents in play, we’re setting up for the week with the following markets…