From Bearish To Bullish To Bearish In a single Day

The first three days of this week have been eventful — though whether that's exciting or exhausting depends entirely on who you ask. With over 3000mt of product changing hands via our books, we can't find a straight line or direction in the trades, but they seem to be all over the place. 

Cheese prices are trading roughly flat, but at high levels. SMP continues to show bullish momentum. And butter? Up in the morning, down in the afternoon, up again around tea time, down after dinner. Where volatility creates opportunity, irrational price behaviour — driven by market participants themselves — mostly just creates frustration. Meanwhile, the geopolitical picture in the Middle East darkens further, and milk is flowing like there's no tomorrow.

The fundamentals scream oversupply. Buyers keep scooping up offers anyway. Let's unpack what we're seeing.

Spot Liquids

Pre-Easter always stirs a bit of extra buying appetite, but calling liquid fundamentals bullish feels like a stretch.

Raw milk prices in the Netherlands and Germany are still holding just above €0.12/kg. In France, however, the price has fallen below €0.10 — with some pickup prices reportedly around €0.05. Skim milk concentrate tells a similar story: with SMP trading above €2,600, you'd expect SMC to track somewhere near €2,000. Instead, sellers are struggling to find buyers at €500. Cream is saving the day again — likely driven by solid fresh demand ahead of Easter. A normal seasonal pattern would see next-week/week after cream prices soften. For now, at roughly €5,250, cream is holding strong relative to all other liquids.

Milk Supply

The latest French milk intake data shows last week's volumes matching the peak weeks of last year. Whether volumes continue to climb is anyone's question, but if they do, France could end the first months of 2025 roughly 4–6% above year-ago levels. German weekly data shows no sign of slowing either — the highest single weekly milk intake on record, with the seasonal flush still 10–12 weeks away. EU butter production is running +6.5% year-on-year, comfortably outpacing the already strong 2025 base. If intake continues to increase, expect cream, smc and raw milk prices to experience extra pressure for the coming weeks.

The EU isn't alone. The US dairy herd is the largest it has ever been, according to recent data, with milk output per cow also rising, keeping total US milk intake elevated through the coming months. CME butter prices have tumbled over recent days, and we think the market is setting up to test the lows seen earlier this year.

But is this market Bullish or Bearish?

That's the million-dollar question. The fundamental data screams bearish. Show these supply numbers to any agricultural commodity trader — record worldwide production, the highest output ever seen — and they'll tell you prices should be testing historic lows. In the US, that's exactly what's happened. In the EU and New Zealand, it hasn't. Not yet.

So the bull case writes itself: "Even with record milk volumes, prices are still moving up. If milk volumes ever drop, this market goes parabolic."

The answer will be obvious in hindsight — it always is. But even through our bearish goggles, we have to acknowledge that this market is holding up remarkably well. Better than we forecast. Better than we can currently explain.

Our bearish thesis still holds that forward buyers are outnumbering short-horizon sellers. Once that buy-side demand dries up, we could face 6–9 months of sustained downward pressure — aged butter sitting in cold stores, hedged against 18-month forward contracts placed at today's levels. But if that's not the explanation for the current strength... we may have to swap the bearish goggles for a pair of bullish horns.

Butter: Futures Supporting Physical oversupply

Cheese is showing real tightness. Butter is showing real oversupply. Call any cold store in the Netherlands to book storage capacity right now — they're full. And it's only March. Warehouses outside the Netherlands are filling up fast, and we are genuinely concerned about a lack of storage capacity as we head into the flush. On top of that, defrost capacity for the coming months is almost fully booked: traders are expected to use frozen stock to fulfil customer commitments while simultaneously freezing fresh production to rotate out aging inventory. The logistics of this market are quietly becoming a problem.

And yet — every time butter drops a little, EEX futures catch it. Prices are holding up remarkably well.

Just today, Q2 physical butter traded at €4,675 while EEX futures were quoted at €4,975. In H2, that spread is sometimes wider than €300. We struggle to understand why buyers on futures still prefer to pay a €300 premium over physical. Looking at today's spot market — roughly €4,600 — against the EEX average quotation of €4,600, that spread is actually zero. We understand that EEX quotations don't always perfectly reflect the physical market. But trading at a €300 discount to futures? We can't find the longterm data to support that basis risk.

This week, Q2 butter prices traded between €4,600 and €4,750. H2 traded in a range of €5,000–€5,060. Spread trades are active, with Q2 changing hands at roughly €200 below Q3 and €300 below H2.

Cheese: Bullish around € 3600

Something interesting is happening in the cheese market: everything has converged on the same price. Mozzarella, Edam, Gouda, Maasdam, Emmental, Cheddar — across the board, €3,600 seems to be where the market has settled. Certain origins trade at a premium or discount, but as a general reference point, €3,600 is the number. Cheese has found its floor — and apparently its ceiling too.

We are seeing more sellers enter the market, but none with any real urgency to move lower. The selling interest is there; the motivation to discount isn't.

On that note, we have availability on the following:

• Mozzarella — March / April / May @ €3,600
• Gouda — March / April @ €3,600
• Emmental (grating) — first half of March @ €3,600

If any of the above is of interest, don't hesitate to reach out.

Powders: Stubbornly Bullish

If you want a bullish story right now, look at powder.

CME: bullish. GDT and Pulse: bullish. WMP, whey powder — bullish across the board. The powder complex is sending one consistent signal, and it's been doing so long enough that it's hard to dismiss.

What keeps so many of our partners sceptical is the same thing keeping us cautious everywhere else: there is simply so much milk. Cheap SMC, a flush that hasn't even started yet, ongoing export disruptions — there is plenty of ammunition for the bears. And yet demand for milk proteins appears to be outpacing what the supply side can absorb. For now, at least.

Current price indications:

• SMP — €2,550–€2,700 for Q2 (depending on age, packaging, and origin)
• WMP — €3,300–€3,380