Bears Break the Butter Market

Lately, we don't have the time to write a report for Friday anymore, but the rollercoaster in the butter market over the past two days has compelled us to shed some light on the situation. In a stunning revelation, the dairy market decided that sky-high butter prices weren't sustainable—who would've guessed? Prices for Q1 plummeted €450 to €6,800 in just one day, and Q2 is trending almost €350 lower, with the lowest price trading at €6,500. There's no denying the bear market now. December prices seem to be taking the biggest hit. Those in urgent need for the product this week still paid €7,750 yesterday, but prices declined quickly. Next week's loading dropped to €7,550 for fresh products and €7,300 for frozen goods. But prices for week 52 nosedived more than €650 to well below €7,000.

And of course, with lower prices, the finger-pointing heats up again. Traders are being slapped with the market manipulation card, and even our inboxes and WhatsApp are buzzing with accusations aimed at our platform and market trade information. It seems sellers adore a transparent market when prices are on the rise but are quick to dismiss the business done on physical and future markets by brokers when the trend isn't their friend. Realistically, the market over the next months needs to find support for the expected oversupply in December and Q1 and is likely to find that below the prices of Q2. Even with cream prices still well over €10,000, the market produces more block butter than it apparently knows what to do with.

Why this bear trend is different

We've seen bearish moves over the last nine months before, and admittedly, they were caused by speculative traders anticipating a change in the supply and demand balance. But with every bearish move, producers watched the market with a relaxed smile. "We're happy to see the sellers dig their own grave," we recall one producer telling us. The clear imbalance between supply and demand made them feel comfortable, and low stocks and low milk forecasts put them at ease to wait with sales.

Since the start of the recent price decline, for the first time, we're seeing and hearing a change in this pattern. Speaking to producers, they acknowledge the likelihood of a correction and are proactively offering to us, the end-users and the trade. Surely their target price lies a bit higher than the prices we are seeing traded today. They are debating the prices levels, not the price direction. Add to the fact that we see more availability nearby than expected, many sellers and producers seem eager to drop their prices faster than they did in earlier rallies.

So, with producers and traders in consensus that the market should trade lower—all chasing the same buyers—the main question is how big the uncovered demand for Q1 is and how long the buyers who aren't done purchasing are willing to wait. Every week they postpone purchases might add to the pressure on the sales side of the market.

Chasing the bid

Remember when the buyers were stubborn and didn't want to accept higher offers? We recall conversations with sellers secretly enjoying the fact that buyers were hunting the lower offers while they increased theirs every day. As discussed in the article The Five Stages of a Buyers Grief we detailed the emotional fases buyers who saw prices increase by the our dealt with these markets. "But karma is a b***h," one of our buyers replied today. After paying prices well over €8,000 for November, he feels it's payback time. We feel the sellers will be chasing the buyers' bids over the next few weeks.

Finding Balance?

We know we'll get some strong replies to this market update as it feeds the bearish sentiment. But we've been vocal about our bullish outlook when the signals were clearly bullish. For us, the signals now clearly point to short-term bearishness. That said, we want to advise buyers not to expect the market to drop to levels of the past. The market has never taken so little stock into the new year, and even if the EU improves its supply and demand balance by 40,000 mt in 2025, we still expect a tight Q4 next year. Getting too greedy might bring back that same karma that's biting the greedy sellers—buyers beware.

We expect to have the following markets:

Product	Origin	Volume	Period	Price	Incoterm
Lactic Unsalted Fresh/Frozen	Irish	88	Week 52	€ 7000	FCA NL
Lactic Unsalted Fresh/Frozen	Denmark	44	Week 52	€ 7150	FCA NL
Sweet Cream Unsalted Frozen	Irish	88	Dec	€ 7300	FCA NL
Lactic Unsalted Fresh/Frozen	Arla DK	66	Q1	€ 6900	FCA NL
Lactic Unsalted Fresh/Frozen	NL/DE/BE	66	December	€ 7300	FCA NL
Lactic Unsalted Fresh/Frozen	NL/DE/BE	132	Q1	€ 6900	DAP NL

We Expect to have Buyers for

Product	Origin	Volume	Period	Price	Incoterm
Lactic Unsalted Fresh/Frozen	Irish	88	Dec	€ 6650	FCA NL
Lactic Unsalted Fresh/Frozen	Irish Winter	66	Q1	€ 6600	FCA NL
Lactic Unsalted Fresh	NL/BE	132	Q1	€ 6800	FCA NL
Lactic Unsalted Fresh/Frozen	Arla DK	66	Q1	€ 6700	FCA NL
Lactic Unsalted Fresh/Frozen	NL/DE/BE	66	Q1	€ 6750	FCA NL