Knock Out for the Butter Bulls?

The first two trading days of this week have been bearish again, just as they were last week. One of our partners compared the market to a boxing match: last week, the bulls managed to get back on their feet after taking some hard punches, but the bears seem to have them cornered once more. The question is whether today’s hard push will knock the bulls off their feet, or if they’ll manage a miraculous third comeback. We love a good comeback story, and by the end of the day, we found ourselves losing the sellers again and surrounded by butter buyers. The fight continues into a new round. Meanwhile, the powder market feels heavier each day, and the cheese market is also searching for a floor.

No long update today, as market fundamentals haven't changed in our view. Milk intake remains roughly in line with recent weeks. The data we keep receiving showed some recovery in French and German milk intake, although the latest figures suggest that this recovery trend isn’t as steady as some might think. Cream prices remain firm, though each week the highs and lows seem to edge slightly downward. However, we can’t yet speak of a cream crash. SMC and raw milk seem to be under a bit of pressure, but nothing in the liquid markets suggests the sharp decline we’re seeing in commodities. The bearish trend in commodities still feels more sentimental than fundamental.

It may be somewhat controversial to say, but we believe the market isn’t currently facing a lack of demand; rather, it’s facing a lack of buyers. At the same time, the market isn’t flooded with additional product but rather with more sellers looking to de-risk their positions. We’ve written about this before: there is a clear difference between the Supply and Demand balance and the buyer and seller balance. At present, the latter favors the bears, although we still believe (deep down) that the former is more bullish than the current market reflects.

Butter: Sharply Down, Bouncy Up

Continuing the boxing analogy, butter prices seemed to be on the ropes, taking hit after hit. At one point, it felt like a knockout punch was only a few blows away. However, by the end of the day, futures regained roughly €100 to €150 after having lost over €400 since Friday. On the physical side, sellers stepped back, while buyers returned, searching again for offers they had declined just hours before.

We said it last week, and we’ll say it again: demand is clearly still there, but buyers have grown more confident that sellers will move in their direction. Over the past week, we believe that traders have sold more forward than they were able (or willing) to buy back, and they are now collectively carrying a significant short position. Our analysis shows that the market remains tight, and we would still feel confident in claiming that prices for October and November shouldn’t decline as sharply as those in Q1 and Q2. We expect the following markets to unfold accordingly.

Current Butter Market Overview:

NL/DE/BE

Period	Bid	Size	Offer	Size
October	€7350	44	€7500	88
November	€7100	88	€7450	132
Q1	€6600	132	€6900	66
Q2	€6300	132	€7000	66

Irish Butter

Period	Bid	Size	Offer	Size
October	€7200	44	€7400	88
Q1	€6400	132	€7250	Indicative

Polish Butter

Period	Bid	Size	Offer	Size
October	€7300	44	€7750	88
Q1	€6400	132	€6900	132

Cheese Following the Butter 

The cheese market feels heavy, but this is largely because the butter market feels heavy. When looking at spot offers, we don’t really see much pressure. However, due to low butter prices, we hear from our trade partners and producers that buyers are confidently holding off on their purchases. This cautious approach appears to be creating sales pressure, which is pushing prices down slightly.

Once again, it seems to be the lack of buyers, not a lack of demand, that is driving prices lower. We’re still seeing relatively strong export sales for cheese. For Mozzarella, we see sales at around €4,750 CFR Asia, and for Cheddar, we’ve brokered some quantities at over €5,600 CFR Middle East.

Cheese Market Overview:

Gouda

Period	Bid	Size	Offer	Size
October	€4550	44	€4750	44
Q4	€4400	132	€4650	132
Q1	€4000	132	€4500	132

Mozzarella

Period	Bid	Size	Offer	Size
October	€4250	44	€4650	44
Nov-Dec	€4250	132	€4500	88
Q1	€4000	132	€4400	88

Powders: Adding Some Pressure Each Day

This is our 100th attempt to find a new way to tell you the same thing: powders are under pressure, and stocks are steadily building. We’re seeing pressure on WMP, which traded today at €4,100 through our books. There are plenty of sellers offering SMP Codex at around €2,400, and more sellers for non-standardized SMP at €2,450 DAP NL. SWP prices are also starting to feel the pressure, with offers from various origins around €900, although it seems sellers might be willing to drop their prices a bit further.

The latest GDT Pulse didn’t show any spectacular results, so we don't expect any unusual moves there.

Product	Origin	Volume	Period	Price	Incoterm
FCMP	IRL	88	Oct	4150	FCA NL
SWP	Spanish	150	Q4	875	FCA SP
D40	Spanish	200	December-March	975	FCA SP
SWP BB	Epiim	50	Oct	900	FCA NL
SMP Codex	Belgium	100	Oct	2400	FCA NL
SMP Codex with Export docs	BE/DE	150	Q4	2425	FCA BE/DE

We would have the following bids

Product	Origin	Volume	Period	Price	Incoterm
FCMP	IRL/BE	44	November	3900	FCA NL
SMP Nonstand	EU15	100	Oct	2375	DAP PL
SMP Codex ONIL Ready	EU	500	Oct	2370	FCA
SMP Codex	Solarec	300	Q1	2400	FCA