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Fundament Breaks Sentiment

2 min read
  • Butter
  • Cheese
  • Powder

We've said it before, and we’ll keep repeating it when it fits: sentiment drives the short-term market, while fundamentals dictate the long-term. The recent downturn in butter—Q1 dropping from €7,850 to €6,950—was sentiment-driven, but fundamentals are now pulling prices back up. There’s little justification for the lower trades other than speculation that “more milk should come.” However, the data shows otherwise, and we don't see the market heading lower.

Today, the spot market for liquids was relatively stable. A revision in a Belgian factory slightly increased cream availability, but strong demand kept prices firm around €9,800 FCA to just over €10,000 DAP. Raw milk prices remain robust at over 60 cents, with only SMC showing slight weakness—trading highs of €2,650 but closing just below €2,500.

Butter quotations surged to an average of €7,923, signaling that the market is not in decline. EEX futures reacted immediately, with the forward curve for Q1 moving higher. Yesterday, we saw prices as low as €6,950, but by day’s end, bids had risen to €7,300 with no offers in sight. Buyers who were hesitant yesterday are now scrambling to secure offers that have since disappeared.

One end-user questioned what had changed overnight. We responded by asking why he wanted to buy today but not yesterday. Even seasoned traders, purchasing managers, and business owners fall prey to herd mentality—they want to sell when others sell and buy when everyone else is buying.

Yesterday's best-remaining offers included:

  • 4 trucks of Irish butter for October FCA Ireland at €7,875
  • 3 trucks of Irish butter for Q4 FCA NL at €7,900
  • 6 trucks of NL/DE/BE butter for Q4 at €8,000

The cheese market remains strong, with deals closed for Gouda in October at €4,600 and ongoing buying interest at that level. Mozzarella demand is also high, with sellers holding firm on prices. We start today with:

  • 2 trucks of Mozzarella NL/DE/BE/DK for early September at €4,600
  • 2 trucks of Gouda NL/DE for September at €4,600
  • 6 trucks of Mozzarella NL/DE/BE/DK for Q4 at €4,850

The powder market feels increasingly bullish. SMP FEED prices for Q4 traded up to €2,650, with Q1 surpassing €2,700. EEX futures are climbing, and we saw trades for Belgian Codex at €2,600 and EU non-standardized at €2,660. Current offers include:

  • 100mt of UK/Irish non-standardized DAP NL at €2,660
  • 300mt of Solarec SMP for Q4 at €2,675
  • 300mt of UK non-standardized DAP NL for September at €2,640
  • 300mt of Belgian Codex at €2,550 FCA

Markets are unpredictable, but understanding the balance between sentiment and fundamentals is crucial. Stay sharp, stay informed, and capitalize on the shifts.

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