Powder Pivots and Butter Bounces

Yesterday, we had a notable shift occuring in the dairy market, surprising many. Following a week of declines in powdered products and further downturns in butter trade, there was a noticeable change. Buyers began returning to the market place as the lower prices appeared appealing, while sellers withdrew from the market not satisfied with the lower price levels. With the powder market pivoting and butter market slightly bouncing, questions arose: Is this merely a dead cow bounce? or an early start to the post-Easter surge?

In our view, the market's recent behaviour can be best described by a fluctuating sentiment, rather than significant changes in fundamentals. The above picture might describe the market best. While factors such as milk supply and export demand have remained relatively stable, market sentiment has been volatile. Some traders seem less concerned with understanding the reasons behind market shifts and instead focus on reacting to observable trends. However, relying solely on what is seen, rather than considering underlying factors, can lead to dizziness when sentiment changes frequently.

Yet, it would be inaccurate to say there have been no fundamental changes at all. Observing the spot market for liquid products, it appears that prices had dropped too low and were due for a correction. Reports indicate rising prices for SMC in Germany and cream prices trending upwards, indicating a correction in the market.

In the butter market, prices have rebounded in several regions, with Q2 prices showing an upward trend. However, uncertainty remains regarding whether this is merely a correction or a longer-term trend reversal. The direction of cream prices next week is expected to provide clarity. Currently, there is demand for Q2/2 and 4  and we are looking for sellers in NL/DE/BE at levels around € 5550 / € 5650 and € 5750

The cheese market seems relatively stable, with limited activity observed. Producers are offering minimal products for future delivery, while buyers show little interest in immediate purchases. Overall, the cheese market appears to be moving sideways with some bullish indications. We would have buyers for Gouda in Q2/3 at € 3800/€3850 levels and for cheddar we see demand around € 3900.

In the SMP market, there was a notable shift from sellers to buyers. Despite slightly higher SMC prices, the production of SMP at or just below certain price points remains feasible. Export demand has decreased, with reports of low trades for future quarters. We hear prices for Q2 and Q3 as low as $ 2450 CFR. However, buyer interest persists around the € 2100 price levels, particularly for fresh medium heat products or around € 2150 levels for non-standardized products.