Daily Update 26th of October:

Yesterday the markets felt a good bit weaker. Both cheese and butter saw lower offers for Q1 and SMP prices kept at the same level. And although today is the most active day for liquid trading, the market for cream yesterday already came off a good bit. 

It is not strange that markets for raw milk, cream and SMC are under pressure, the supply side is growing quite fast. September milk intake in the Netherlands came in 3.85% higher compared to last year, and the milk solids were reported also a bit better compared to a year before. Germany and France saw their milk intake grow by more than 1% on a week-to-week basis and so did the UK. Milk production is strong so it needs to find an outlet.

Speaking to Irish producers, they are faced with the same "issue" as their continental partners. Milk production is stronger than forecasted so sales teams that were selling with the handbrake on now need to step on the gas peddle and push more products onto the market. But some producers argue that, although they have more milk than forecasted 6 months ago, it is still less than forecasted 12 months ago. For the producers the market isn't that much oversupplied, it is the sluggish demand that is causing the current weakness. And although we can't find the buyers for big quantities either, we must admit that finding products for closeby is also not that easy yet. We are still in search of fresh butter for this week and the best price we could find and broker was € 6580,- (compared to € 5990 Q1 trades).

The lower prices we see in Q1 for Gouda, SMP and butter are mainly caused by the anticipation that supply will outperform demand. But if the demand side finds some strength, the supply side is arguably still a big risk for dairy participants.