A Fat Bullmarket

The market for us is getting harder and harder to summarize in a single update, there are just too many moving parts. What we can say for sure is that the market has turned incredibly bullish in just three weeks. What initially felt like a short squeeze has evolved into something more substantial and fundamentally stronger than we anticipated. Butter prices are soaring with no ceiling in sight, and cheese is following closely behind. The only red spot is protein prices, though the downside risk seems limited. Meanwhile, the USD is weakening, and concerns about the US economy are growing. Their tariff war with Canada and China is intensifying, and in Europe, we’re still waiting for Mr. Trump’s verdict on EU tariffs. With the US economy taking hits left and right, some believe he might reconsider adding another adversary to his trade war battlefield. The unpredictability is keeping export markets on their toes.

But let’s focus on the EU side of our business since we already have enough trouble piecing together this puzzle.

Liquids: A Tight Market That Shouldn’t Be Tight?

Cream prices jumped yesterday. The low end of the market was reported as "low" as €8,850, but we’ve also heard confirmed prices at €9,200 DAP. As one trader put it, it seems fair to value cream around €9,000 at the moment. Normally, cream prices in March trade well below butter prices, so either cream is overpriced, or butter is still too cheap.

Those trading liquids report more raw milk availability, with SMC prices under pressure. Not everyone understands the tight cream market, given that higher prices should dampen demand while raw milk and SMC availability should loosen up the spot market. We might see more offers later this week as suppliers prefer to wait and see where prices settle rather than setting them themselves.

Butter: Full-Blown Bullish

We initially labeled this butter rally as a correction—one that overshot—then as a short squeeze. But let’s call it what it is: bullish. Tight stocks, high cream prices, more buyers than sellers, and disappointing milk supply in Germany and France make for an undeniably strong market. Buyers searching for Q3 and Q4 supply are left with one option: accept the higher prices. A few still cling to the hope of lower prices, but most are accepting reality.

Normally, we’d balance this out with some bearish signals—but let’s be honest, those have been ignored for weeks and will likely continue to be. Yes, the Irish milk season looks to be set up solid, but as long as there’s an outlet to the US and they are early in their season, pressure won’t build. Yes, cheaper butter is available from the UK, Ukraine, the US, and New Zealand, but plenty of buyers need German, French, or Dutch butter—which is in short supply. Yes, exports will get tougher, but first, existing orders need to be filled. The pressure from reduced exports will come later. Prices will correct eventually—whether that’s in two weeks, two months, or two quarters is anyone’s guess. As long as buyers are more afraid of rising prices than sellers are of hitting the peak, we’ll keep climbing toward €8,000.

Current Bids:

• 6 loads Irish butter for Q2 at €7,400 FCA Ireland
• 6 loads NL/DE/BE butter for Q2 at €7,500
• 2 loads Lumiko lactic at €7,350 FCA NL for March/April
• 6 loads NL/DE/BE butter for Q3 at €7,450

Cheese: No Sellers, Just More Buyers

Much like butter, the cheese market can only be described as bullish. Sellers/producers see no reason to offer forward sales at flat prices—especially with butter nearing all-time highs while cheese still trades roughly €1,000 below its previous peaks. Industrial demand isn’t booming, but those needing products face a seller’s market, with fewer willing sellers and more aggressive buyers.

If butter prices remain strong, cheese will likely follow. There’s plenty of upside potential—2022/2023 showed us that Gouda and Mozzarella prices above €5,000 could be sustained from March through November without losing too much traction.

Could we use some nuance? Sure. Back then, we had a bullish SMP market supporting €5,000+ cheese prices, and global market dynamics were different. But short-term sentiment is stronger than long-term fundamentals right now. The imbalance between willing sellers and eager buyers could push prices even higher.

Expected Bids:

• 2 trucks March Gouda NL/DE at €4,400
• 2 trucks Mozzarella for March at €4,225
• 6 trucks Mozzarella for Q2 at €4,200
• 6 trucks Gouda for Q2 at €4,400

Available Offer:

• 1 truck Edam Antje (NL origin) for prompt at €4,350 FCA NL

Powders: The Party Pooper

And now, the killjoy of the dairy market: SMP. With SMC prices under pressure, export opportunities dwindling due to a weaker USD, and sluggish EU demand, the powder market shows little upside potential. More offers from producers are coming in, while competition in the global market is heating up.

As we write, the USD is weakening further, suggesting even more downward pressure. That said, there’s strong support at the €2,350 level, and we doubt prices will drop significantly lower—at least as long as milk output in Germany and France remains disappointing.

Expected Offers:

• 90mt of SWP from Spain at €1,100
• 300mt German SMP at €2,425 for Q2
• 220mt Uelzena SMP for prompt (October production) at €2,400 FCA DE

Final Thoughts

The dairy market continues its rollercoaster ride, with butter and cheese showing relentless bullish momentum while powders remain stuck in the mud. The real question is how long this bull run can last before something gives. But as long as buyers remain in panic mode and sellers hold back, we’ll keep climbing. For now, strap in and enjoy the ride.