Sliding Sideways Into The Summer Season

Last week was challenging to summarize. The GDT showed a bearish headline number, although the details revealed some bullish signals for butter and SMP. In the EU, prices for raw milk, SMC, and cream traded slightly higher, and the sentiment in the butter and SMP markets became a bit more bullish. However, there were not many trades to confirm these sentiments. Butter partners remained silent, cheese buyers played hide and seek, and powder partners withdrew their offers, but we didn't see many aggressive buyers chasing the remaining offers. Looking back at the prices since the first of June, there haven't been many changes. Now, with only a few weeks before summer starts, it seems we are silently sliding into summer without a pre-summer rally or crash, as many might have expected. The question remains: can this market remain steady during the next two months? Or will the summer temperatures starting in the north and west of the EU heat up the market sentiment before we pack our bags and leave for a well-deserved break?

With temperatures finally rising, we shared our first ice cream of the year with our son in the sun. We rode our bikes into the city center, surrounded by many other parents with the same idea. We spoke with the owner of the ice cream parlour we visited, and he said he hoped the season would finally start this weekend. After a painful 20-minute wait with a very impatient 5-year-old, we enjoyed two scoops of stracciatella ice cream, and it tasted like summer. Looking ahead, this week we will see temperatures rise to 30 degrees, so leaving the parlour, our son agreed with the owner we would visit again soon, my son hoping "soon" meant later that same day.

The warmer weather should have a bullish effect on fresh demand. Last week, we saw prices for cream and SMC trade higher, and now with BBQ season starting, the demand for garlic and other herbal butter should increase as well. If prices for cream and SMC increase further this week, we expect butter and SMP prices to do the same. Speaking to our partners who trade a lot of liquids, we heard that due to slower demand for cheese, more milk is being sold by cheese producers than in previous weeks. This confirms our stable to slightly bearish market view for cheese, but it could also mean cheese output will be lower in the coming weeks. Therefore, a further drop in cheese prices seems unlikely.

We expect no major events this week, although we did hear more partners talk about ONIL. The announcement of ONIL usually has a bullish effect on prices for SMP and FCMP, with the result usually bringing the market back to where it traded before. But we might see a bit more activity in powders.

Butter: Waiting for the Big Buyers?

Last week, the butter market did not move much from where it traded the week before. The bullish GDT confirmed the bullish view most producers have on the market, our market analysis, and the expectations for higher prices from many different partners. The only thing not confirmed was the higher offers in the market. Speaking to our partners, we see enormous resistance among buyers.

Both traders and producers confirm they were getting big requests for proposals from different industries, most focused on Q3 and Q4 deliveries. But with the bullish view in the market, our partners decided to offer at higher levels than in previous weeks, pushing buyers back into their offices. At these higher prices, the hope for lower prices is stronger than the fear of higher prices, and buyers keep saying, "we can always buy expensive."

With that strategy still in place, we expect more sideways trading unless cream prices find their way well over €8000. It seems the majority of buyers are done for their July purchases; August onwards seems a problem that can be tackled when the time comes.

We start the day with:

• An offer for 2 trucks of Galli butter for June at €6575 DAP NL
• An offer for 4 trucks of French butter for July at €6660 FCA NL
• An offer for 2 trucks of Irish butter for July at €6675 FCA NL
• An offer for 3 trucks of NL/DE/BE for Q3 at €6700
• An offer for 3 trucks of NL/DE/BE for Q4 at €6775
• An offer for 3 trucks of NL/DE/BE for July at €6625
• An offer for 1 truck of German 10kg butter for July at €6650

We have buyers for:

• 4 trucks of Irish butter for June at €6550
• 6 trucks of NL/DE/BE fresh/frozen for Q3 at €6650
• 6 trucks of NL/DE/BE fresh for Q4 at €6700
• 6 trucks of Arla DK frozen butter for June at €6500
• 8 trucks of NL/BE/FI winter butter for September/October at €6775
• 6 trucks of Lumiko Lactic Frozen for August/September at €6500
• 4 trucks of Mlekovita Sweet Cream for July at €6450

Cheese: Price Down, Production Down?

The cheese market is trading sideways on a very slow downward slope. Prices seem to be declining a bit each week, but so slowly that you really need to be looking for it. Producers claim steady sales, and end users claim the same. There seems to be no real increase in demand, and speaking to partners who trade raw milk, they see cheese producers selling a bit more milk above 46ct. The philosophy is that if cheese prices don't increase further, selling raw milk valorizes better than producing commodities. This could potentially create a bit of a rally in a few weeks' time.

As said before, we don't see much downside for the cheese market, but we would only see upside if butter/SMP valorization improves and producers divert more milk from cheese production. So far, SMP prices keep dropping and butter is hitting high resistance. Therefore, we think prices will continue to trade sideways.

We start with offers for:

• 4 trucks of NL/DE Gouda for July/August at €4100
• 4 trucks of Mozzarella for July/August at €4100

Powders: No Room Down, But Is There Room Up?

The powder market again showed that hitting the low SMP prices around €2300 triggers demand, and prices rally every time we near these prices. With low stocks, higher SMC prices, and low production numbers from recent months in the EU, US, and NZ, the fundamentals are bullish. The market needs to find a new China, and until then, prices will probably trade sideways.

Some expect that starting Q4, prices will surge again (but we have heard this in 2022 and 2023 as well), and we saw that prices on GDT traded up. EEX futures also trended up, and on our physical side of the market, we see the same. We expect the following demand:

• 300mt Solarec SMP August/September at € 2400
• 300mt Solarec SMP Q4 at € 2560