Butter Boosts and Powder Plunges

Again a two-faced market where one part of the market rallies to 2023 year highs and the other part loses all the gains it made in the previous 8 weeks. It's a story about tight supply and high stocks. A market where for one product we only see sellers, and for the other we only see buyers. It is a market that seems to be influenced by sentiment and less by fundamental arguments, or at least that is how a big part of our partner base looks at the market. Sentiment now over shouts the voice of fundamentals, both on the bullish butter market as it does on the bearish powder market. For us brokers a market with a lot of movement, for our partners a market with a lot of question marks, and for our readers.. a copy of the report of the last weeks. 

Fundamentally we see little differences in the market. The milk supply is tight, but it doesn't really seem to get tighter than in the last weeks. Prices of SMC might be a bit firmer, but powders are correcting lower. Looking at the price of cream we still see relatively stable prices between € 6800 and € 7000 FCA and raw milk prices trade steadily around 45ct or slightly higher. As said we have some doubts about the Dutch and Irish milk supply, but Western EU farmers should have plenty of grass from this year's season. Feed and energy costs are coming down and milk prices are improving over the last months. For farmers, the outlook is quite OK.

Today's upward rally for butter seems to be led by traders caught short on supply (or afraid they will be caught short) and good demand for futures. But the demand isn't visible in the physical market (yet) and today we got, again, more feedback from industrial buyers that their demand is weak, their sales forecast for next year is down and their stocks are high. Some spot demand for specific products is to be found in the market, but it seems to be too small to pull the market up as high as we have been seeing in the last days.

• We have sellers for 4x Irish Sweet cream FCA NL for November / December at € 5450
• We have sellers for 6x Portuguese Sweet Cream butter FCA NL for November
• We have sellers for 2x German lactic for December at € 5500
• We have sellers for 4x Salted Sweet Cream FCA NL at € 5400 FCA Ireland
• We have sellers for 2-4 loads of Italien butter at € 5250 FCA Italy

The powder market shows a completely opposite picture. The downtrends seem to be caused by pressure on the trader's side and a bit of selling pressure on EEX. End-of-year stocks are pushing on the results of companies and some are trying to get rid of the oldest product they have. But looking at the supply side, we don't hear any pressure from the producer's side. SMC prices are high and additional production seems very unlikely. Some factories have to buy additional milk to fulfil demand and signed contracts, and for some origins, we hear that there are delays.

• 300 tons Sofivo/Armor fresh smp for Nov/Dec with Export Docs @ €2,50o fca fr
• 300 tons of NL/DE/FR/IRL Codex, max 6 months old at € 2450 DAP NL
• 240mt of UK BMP for November delivery at € 2150 DAP NL
• 24mt of German SMP € 2450 fca NL for November
• 300 tons Solarec, June 23 or fresher for Nov/Dec with Export Docs @ €2,550 fca be

Looking at the cheese market no news. Buyers aim to buy Gouda and Edam slightly above € 4000,- but sellers aim for prices roughly 15ct higher. Demand for other cheeses remains low. We see the following offers

• 10 loads UK Cheddar curd at € 3650 FCA UK
• 8 loads NL/DE/FR/BE mozzarella for November / December at € 3750

So we have a butter market in a bullish rally without significant buying interest from the industry, and a powders market that plunges without suppliers able to offer any additional supply. Fundamentally we (and our partners) are either missing something or we should see a change in sentiment. Because sentiment can only last for so long, in the end, fundamentals matter and will retake control of the market price. In our opinion butter is overheated and powders are undervalued.