Long on Liquids, Short on Liquidity

The market once again behaved irrationally yesterday. In the EU, liquid markets are starting to feel heavy under the weight of building milk volumes. Cream, SMC and raw milk prices are all under pressure. The latest collection data shows no signs of slowing, and as we move closer to peak production, expectations are clear: pressure on spot milk prices is set to intensify.

At the same time, liquidity in commodity markets remains painfully thin — on both the buying and selling side. Butter proved the point. One buyer grew tired of waiting, and with only limited volumes changing hands, the market traded €200/mt above where bids opened in the morning. But when sellers attempted to push additional volume, bids quickly fell back more than €150/mt. That tells you everything about this market. It’s not short on liquids. It’s short on liquidity.

A quick update today, as there is not much headline news to report. But one thing stands out clearly: continued pressure on the liquid spot market. Cream started the day firm at or just below €4,000, but quickly lost ground and closed in the red, with trades reported as low as €3,700 by multiple traders. That’s a meaningful intraday swing.

SMC remains surprisingly weak. Prices average around €1,450, but trades as low as €1,250 FCA Germany were reported — a sharp correction versus last week. Raw milk followed the same direction. After bullish sentiment nudged prices slightly higher last week, we now see raw milk back below 20ct, with Benelux levels reported as low as 12–13ct. The milk is there — and more is coming.

US: Correction or Early Signal?

The US is showing a softer tone as well. CME prices have been correcting all week, and yesterday was no exception. Prices are not collapsing, but the sales side feels heavier than the buy side. CME is down roughly 10% from last week’s peak. Whether this is simply a healthy correction after an intense rally, or the start of something deeper, remains to be seen. Milk output in the US continues to run strong, keeping pressure on liquids and production. That said, stocks for butter and NFDM are — so far — not problematic. So fundamentals are not screaming bearish yet.

EEX vs Physical: Disconnect

Last week, strong CME sentiment spilled over into EEX. That correlation is absent this week. Butter futures are trading almost €450 above where we see physical butter trading. Either the physical market is too cheap — or futures liquidity is too thin to properly reflect real value. We would argue the latter. Cheap raw milk, lower cream prices, and increasing stocks justify a softer physical market. Futures look elevated, but depth is questionable.

Butter: Up on Small Trades

Butter moved up yesterday. Q2 NL/DE/BE traded back toward €4,450 after being around €4,200 Tuesday morning. But once additional offers appeared, buying interest faded again toward €4,275. One buyer can lift this market €200. One seller can drop it €200. That tells you everything about liquidity right now.

We traded:

• 200mt NL/DE/BE butter
• 126mt Polish Sweet Cream butter for March at €4,150

If we had to guess tomorrow’s opening levels:

• Q2 NL/DE/BE: Offered €4,450 | Bid €4,275
• Q3 NL/DE/BE: Offered €4,600 | Bid €4,400

Cheese: Strong Support, Little Flow

We haven’t written much about cheese lately. That’s partly because sellers are not very active — and partly because the bid-ask spread has been incredibly wide for weeks. Traders report limited availability from producers, while end users remain short-covered and buy hand-to-mouth.

Reported levels:

• Mozzarella: €3,300–3,400
• Gouda aiming slightly higher

We are looking for:

• February: 2 loads Mozzarella NL/DE/BE/FR at €3,300, offered at €3,400
• February: 2 loads Gouda at €3,300, indicated offer €3,450

Cheese feels supported — but liquidity is not deep here either.

Powders: From Wild to Waiting

The powder market was wild over the last three weeks. This week, waters are calmer. Buyers still in the market are in no rush. Bids are coming in significantly lower than last week. At the same time, some partners appear to still carry length — and are not willing to realize losses just yet. CME may be cooling, but next week’s GDT could easily bring volatility back.

Final Note

What we are seeing across the board is not a market short on product — it is a market short on conviction. Milk is building. Liquids are heavy. Futures look disconnected. Physical markets move on marginal volume. And every €200 move lacks follow-through. When supply builds into a market with thin participation, price discovery becomes fragile.

Long on liquids.
Short on liquidity.

And in markets like this, depth matters more than direction.