Dairy Market on the Fence

The last two weeks have been, let's say, refreshingly uneventful. Many of our partners have been busy with the pre-show jitters, making their rounds at SIAL, and then dealing with the inevitable post-event digestion phase. Naturally, quite a few decisions were put on hold the week leading up to the exhibition in Paris, with everyone hoping for some sudden market enlightenment or a shift in sentiment. But as the dust settled last week, it became clear: the general consensus in the market is that a multitude of scenarios is still on the table, and picking the right one is about as predictable as a spin at the roulette table. So, with no crystal-clear outlook in sight for the next few weeks, it seems the market will continue to play it safe, trading on a hand-to-mouth basis until we get a better sense of the supply/demand dynamics for next year. In the meantime, we expect most partners to have their sights firmly set on the Christmas season and to delay any big 2025 decisions for as long as they can get away with it.

Interestingly enough, the market's lack of surprises was... well, a surprise. We were half-expecting it to pick a lane, but as it stands, the dynamics haven't shifted, and neither has the sideways trend. The spot market for liquids remains pretty tight. Cream prices danced above €10,000 during the week, only to dip slightly as a few lost loads reappeared by week's end. Meanwhile, SMC prices continued their gentle descent, hanging around €2,200, while raw milk held its ground at around 60 cents. Liquid traders seem confident that raw milk will stay firm, and cream prices are likely to rise thanks to the holiday production surge. With butter prices on the upswing, fewer producers are willing to part with their cream, tightening the market even further. So, in the short term, we’re maintaining a bullish stance on the liquid market.

Looking further ahead, the general consensus is that milk intake will increase as producers boost their contract prices. More milk on the market should mean a looser spot situation for liquids. There's a growing expectation among traders that cream prices will take a significant hit in the new year, alongside raw milk and SMC prices. However, we’re not quite convinced about the EU dairy industry's capacity to ramp up production in such a politically unpredictable environment.

Butter: More Spot Buyers Expected

Last week's butter market didn’t offer any fireworks for Q1, but for those in the immediate term, we did see some ripples. The trend of buyers adopting hand-to-mouth strategies continues, leading to fluctuating spot demand. There's particularly strong interest in sweet cream, with much of it headed for export—even at current prices. We brokered Irish Sweet Cream between €7,500 and €7,600, and there’s even higher demand for Polish sweet cream. Our current sweet cream butter offers are holding steady, but the market remains watchful for the next move.

Period	Origin	Size	Offer	Incoterm
October	Polish	88	€7850	FCA Poland
November	Portugees	66	€7600	FCA Portugal
November	Irish	88	€7600	FCA Ireland

We've also noticed a surge in demand for German butter. With cream prices holding firm above €9,500 since early September, butter production in Germany has seen a significant drop. Adding to this, the shortage of Irish butter earlier in the year seems to have pushed more German butter into contracts that typically would’ve been filled with Irish supplies. So, for those hunting German butter, you might find it’s a bit like searching for a needle in a haystack—unless, of course, you go straight to the producers. Given that cream prices are still hovering above €10,000, we’re hearing about German butter sales comfortably exceeding €8,000, matching up with the official German butter quotations. Our outlook? German butter prices are likely to stay firm around that €8,000 mark as long as cream prices refuse to back down.

On the flip side of the butter spectrum, we've got the Irish. They’re still quite eager to push butter out the door at anything above €7,000 for as long as they can get away with it. There's a general expectation that butter prices will start to slide next year, so the strategy seems to be: clear the shelves before the ball drops. When we asked a few if they were worried about overcommitting, like they did last year, the response was clear—they'd rather oversell than sit on excess stock. By the end of the week, however, offers appeared to be thinning out, leaving us uncertain whether lower prices will hold steady. Here’s how we see the lactic market unfolding...

Period	Origin	Size	Offer	Incoterm
November	German	44	€7850	FCA NL
November	NL/DE/BE	66	€7700	FCA NL/DE/BE
November	Irish	88	€7350	FCA Ireland
December	Irish	88	€7350	FCA Ireland
Q1	NL/DE/BE	132	€7100	FCA NL/DE/BE

The steep backwardation we're observing for next year is slowly inching its way towards Q4 prices. A dramatic price shift at the stroke of midnight on New Year’s Eve seems highly improbable. While we do anticipate a market correction in 2025, the price gap between Q4 and Q1 is likely to narrow in the coming weeks.

Cheese: Remarkably Weak

The cheese market is, frankly, looking surprisingly weak. In particular, prices for next year are dropping to levels that leave us scratching our heads. The entire price surge we witnessed after the summer appears set to vanish by January, fueled by the expectation of increased milk intake. From conversations with traders, it's clear that the risk they’re taking to lock in sales for next year feels heavier than in previous years. They’re forced to account for a trifecta of risks: a potential slowdown in exports, softer consumer demand, and higher milk intake. If any of these factors perform better—or worse—than expected, it’s the traders who will bear the brunt of it.

Although we're not as deeply connected to the cheese export markets, what we do see in our own numbers is that exports to the Middle East and Africa remain stable. In addition, mozzarella exports are starting to catch more attention once prices dip below €4,250. Given these factors, we’d be genuinely surprised if cheese prices continue to decline. Here’s what we’re currently expecting for offers...

Period	Product	Size	Offer	Incoterm
November	Gouda (NL/DE)	44	€4550	FCA NL/DE
Nov/Dec	Mozzarella (NL/DE/DK/BE)	88	€4275	FCA NL/DE/BE
December	Gouda (NL/DE)	88	€4500	FCA NL/DE
Q1	Mozzarella (NL/DE/DK/BE)	132	€4150	FCA NL/DE/BE
Q1	Gouda (NL/DE)	132	€4400	FCA NL/DE

Powders: (Bouncing) Off the Floor

The powder market seems to be bouncing back from the bottom. Prices below €2,400 for SMP Codex, under €2,500 for non-standardized powders, below €4,000 for FCMP, and under €850 for SWP have all vanished. In recent weeks, there’s been a bit of a rebound in demand, particularly from Southeast Asia, along with a boost from a weaker Euro. With the exchange rate dipping below 1.08, the EU has gained a touch of competitiveness.

However, it’s far too early to call this a bullish market. While the rock-bottom offers have disappeared, we’re still not seeing any strong high bids. Indications remain hovering around the low prices we've witnessed over the past few weeks—or maybe, if we’re being generous, just a tad higher.

We expect to be starting with the following offers.

Product	Origin	Volume	Period	Price	Incoterm
FCMP	IRL/N-Irl	88	Nov/Dec	€ 4150	FCA NL
SWP	Spanish	100	Q4	€ 900	FCA SP
D40	Spanish	200	Dec-March	€ 975	FCA SP
SMP Codex Fresh	Rucker/Uelzena	200	Nov-Dec	€ 2450	FCA NL
SMP Codex Older	Belgium	300	Nov	2400	FCA NL
FCMP Instant 2024 production	Irish	88	Oct-Nov	4125	DAP NL

In the dairy world, it's been a couple of weeks of cautious foot-dragging, posturing, and—let’s face it—a bit of market snoozing. Fresh from the SIAL spectacle, the general vibe is a market frozen in indecision, with everyone hedging bets and playing it safe until the holiday rush is over and the crystal ball clears for 2025.