Doubting Bulls & Greedy Bears

Nothing moves up in a straight line—not even the dairy market. After nearly four weeks of upward movement, the market has taken a bearish turn on butter. Last week, the market felt slightly heavy, but yesterday and today, the weight of selling pressure caused prices to drop significantly. Our bullish sellers, who have been confident for weeks, are starting to show doubts, while the buyers who regretted not purchasing earlier are now getting greedy, driving the market down quickly with aggressive bids. This uncertainty is spilling over into the cheese market, where some partners are now offering cheese at slightly lower levels. Meanwhile, the powder market continues to carve its own path, trading higher while other commodities come under pressure. But the end of yesterday’s trading session hints at a potential reversal—is the downturn short-lived?

Spot Market Liquids: Tight Conditions and Stable Prices

In the spot market for liquids, not much has changed since last week. Cream prices are holding between €9,800 ex-works and just over €10,000 on a delivered basis. Raw milk is trading well over 60 cents, with the German market feeling particularly tight. Good weather continues to drive up demand for fresh products, causing sellers to be cautious about overcommitting their stocks.

Butter Dip: Unexpected Downturn in Butter Prices

The butter market saw an unexpected shift lower. Butter prices for Q4, which traded well over €8,000 last week, are now back to levels between €7,700 and €7,800. Q1 butter futures fell from €7,650 last week to €6,950 this morning and we saw physical trades at € 7000,-. Some sellers, confident that the market was oversold, traded the market down by accepting lower bids. However, this shift attracted buyers back in, causing some sellers to step aside after a few trades.

Taking a steep and looking at the market, most sellers realise that sales below €8,000 don't make much sense for those trying to restock at current cream prices, which remain above €9,500. The critical question is: where will the butter come from if no one is willing to pay the price? Who will produce more than necessary at these levels?

Cheese Market: Lower Offers Amid Growing Supply Tightness

In the cheese market, we see a similar pattern. Buyers are holding off, and some sellers are starting to show nervousness, adjusting offers slightly lower. However, these sellers are mostly traders who anticipated the market's rise in recent weeks. With limited confirmation of further upward momentum, they are eager to secure some sales. But from a supply standpoint, the market is tightening further, and conversations with suppliers indicate growing concerns. The key question is how long these offers will remain available.

Powder Market: Positive Momentum Continues

The powder market remains a bright spot, with continued buying interest for non-standardized material. Sellers are comfortable holding firm on prices, and this positive sentiment was reflected in the latest GDT auction.

GDT Recap: Bullish Sentiment for SMP and Mozzarella

The latest GDT auction saw a slight overall decline of 0.6%, driven mainly by a correction in WMP prices, which followed a 7% increase in the previous event. SMP prices continued their rally, aligning with our forecasts and feedback from traders in Southeast Asia. Mozzarella prices also jumped, with Solarec trading at around €4,600—up almost €800 since July, averaging €200 increases per event.

On the butter and AMF front, there was a small gain in AMF and a minor decline in butter. Solarec butter traded up to €7,800, consistent with prices we see in the NL/DE/BE markets. The volume of products offered was slightly down, which some see as a bullish signal, and the strong performance of mozzarella and SMP offset the WMP correction. The next GDT event will provide a clearer picture of market sentiment.

Market Sentiment: Navigating Uncertainty and Potential Opportunities

The market has been difficult to read over the past few days. After a prolonged period of upward trading in cheese and butter, a correction was inevitable. But with butter prices near all-time highs, market participants are bracing for a potential return to “normal” levels of around €6,000. Cheese sellers appear less nervous, with prices still comfortably above €5,000. Signals from the market regarding milk collections remain consistent: less milk, growing supply concerns, and declining intake.

This week's dip may present an opportunity for buyers—if they haven’t already missed the boat. As always, market dynamics can shift quickly, and staying alert to these changes will be crucial in navigating the volatile months ahead.