Bring Back The Buyers!

Last week was, yet again, not exactly the most bullish week of this year. For those still convinced the market will be bullish at the start of 2025, there are still some signals they can cling to. The French milk number dipped below 2023 levels for the first time in months, cream prices are holding up more firmly than expected, the GDT outcome was positive, and the French (although later revised) and German butter quotations remained high. But those expecting the market to trade lower point out that pressure on the sales side is building and lower market trades are being reported on almost all commodities. Is this just an end-of-year dip? Or the early signs of a bearish start to 2025?

The overall market conditions don’t seem as bearish as some claim. Yes, there is more milk coming in, but not as dramatically as in 2022. Butter stocks are at the lowest point we’ve ever seen, we aren’t exactly drowning in powder stocks, and cheese stocks are slowly building up—yet we don’t see a lot of older stock. So why is the majority of our partners so bearish?

Lack of Buyers and Lack of Volume

The most common complaint from our partners is the lack of active buyers. Especially in the cheese market, it seems buyers have started their early Christmas leave while sellers were hoping for some last-minute purchasing. In the powder market, we see the same pattern. EU buyers seem to have completed their Q1 purchases, and demand is only expected to return in the new year. Only butter buyers are relatively active, although December demand seems non-existent and their main focus is on Q1 + Q2.

What’s striking—and something we can confirm ourselves—is that contracted volumes are a lot smaller compared to previous months. Buyers seem to need less or are spreading their needs more thinly. Looking at our own books, the volume per contract in November went down from averaging 90mt per contract to 50mt per contract while the number of volumes remained the same. And looking at last week, we see the average contract size even dropped to 35mt per contract. It’s too easy to draw real conclusions from just this data, but it does confirm the feedback we’re getting from partners that most buyers purchase less frequently and in smaller volumes. Either they’re still carrying some overflow from previous months due to overbuying, or we’re seeing a genuine slowdown in demand.

The latter seems to be the case. Last week we got requests to delay deliveries from December to Q1 for both butter and cheese contracts. We also hear that some butter repackers are selling off stock to keep their warehouses empty. The tightness that drove November’s prices seems to have vanished for frozen butter. Only some specific needs for fresh or textured butter are keeping prices high for certain brands.

On the SMP market, it appears the market was a bit disappointed by the relatively low volumes on the ONIL and Vinamilk tenders. SMP prices on the GDT also didn’t show any fireworks. Yet again, the same trend emerges: the same buyers are contracting less volume. The question remains—are they buying less due to lower demand, higher stocks, or simply weaker expectations?

A fact in the current market is that there seems to be an imbalance between sellers (plentiful) and buyers (in waiting mode). That certainly signals a bearish market, especially if we add the fact that most analysts expect higher milk prices to add volume to the supply side while the current high commodity prices eat away at demand.

Butter: Questionable Quotations

Last week, the butter market was in a clear downtrend until Wednesday morning. With only sellers and no buyers, we expected the market to trade lower. But when the quotations from France and Germany came out, that sentiment completely flipped. The Dutch came out with a quotation in line with the market we see at €7300. Yes, we agree there have been higher trades done, but we also confirmed trades well below €7000. At €7300, we think the Dutch found a fair reflection of the market we serve.

The German quotation remained steady at €8150, mainly due to the high prices paid for fresh butter and retail. Frozen German butter was available between €7150 and €7400 last week, so for some, that quotation felt well out of range. But the biggest surprise came when the French quotation was reported at €8460, up more than €600 from the week before. The effect of these higher quotations immediately resulted in higher futures trades, and all our sellers backed away from the market—or even turned into buyers.

This high settlement sparked some fierce debates among our partners. Especially those hedged with EEX Contracts were less than thrilled with the higher settlements from the Germans and the French. Also, some of the end users we speak with buy on an EEX average settlement and saw their first settlement price get set well above €8000, while at the same time they see spot prices even below €7000. However, last Friday the French revised their quotation back down to €7830 due to a miscalculation. With this revision, the average EEX index settled down €200 per mt, immediately impacting the bids and offers we saw on the futures and physical markets for December and January.

For this week, we expect all quotations to trend lower—the question is by how much. Based on lower cream trades, cheaper cream around Christmas, and the lower offers we can see from German, Belgian, and Dutch producers, we would be surprised to see settlements hold steady. We expect the market to open with the following offers.

Product	Origin	Volume	Period	Price	Incoterm
Lactic Unsalted Fresh/Frozen	Irish	88	Week 52	€ 6850	FCA NL
Lactic Unsalted Fresh/Frozen	Denmark	44	Week 52	€ 7100	FCA NL
Sweet Cream Unsalted Frozen	Irish	44	Dec	€ 7300	FCA NL
Lactic Unsalted Fresh/Frozen	Arla DK	66	Q1	€ 6900	FCA NL
Lactic Unsalted Fresh/Frozen	NL/DE/BE	66	December	€ 7250	FCA NL
Lactic Unsalted Fresh/Frozen	NL/DE/BE	132	Q1	€ 6925	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	€ 6650	FCA NL
Lactic Unsalted Fresh	NL/BE	132	Q1	€ 6825	FCA NL
Lactic Unsalted Fresh/Frozen	Arla DK	66	Q1	€ 6600	FCA NL
Lactic Unsalted Fresh/Frozen	NL/DE/BE	66	Q1	€ 6775	FCA NL

Cheese: Down we go

The cheese market remains stuck in a slippery downtrend, unable to attract many buyers on its way down. Last Friday, we heard prices in January trading as low as €3850 for Mozzarella and €4150 for Gouda. Cheddar offers keep getting lower, yet we can’t seem to find anyone even remotely interested. Talking to our partners in the cheese market, it appears there’s a serious lack of buying interest across the entire chain. Producers are grumbling about slow offtakes, traders are complaining about minimal forward buying from their customers, and end users are moaning about the prices their partners negotiate—not to mention the low volume commitments that come with these lower prices.

This lack of demand doesn’t seem to be a purely European problem, either. Those supplying export destinations like Japan, Korea, and Taiwan are also noticing delays in offtakes and a slowdown in new orders. The Middle Eastern cheese demand story is much the same. As one partner rather bluntly put it, “Demand isn't gone, but it just feels sluggish.” Negotiations are tough and lengthy, and it seems buyers now have more choices and more confidence, happily postponing purchases unless prices become irresistible. The balance appears to have tipped firmly in favour of the buyers, and they’re making the most of it.

We expect to have the following offer

Product	Origin	Volume	Period	Price	Incoterm
Gouda 48 Slicing	NL/DE	88	December	€ 4300	FCA NL/DE
Mozzarella 40%	NL/DE/BE/DK	88	December	€ 3900	FCA NL/DE/BE
Cheddar	UK	44	Dec	€ 4800	FCA UK
Gouda 48 Slicing	NL/DE	132	Q1	€ 4250	FCA NL/DE
Mozzarella 40%	NL/DE/BE/DK	132	Q1	€ 2950	FCA NL

We Expect to have Buyers for

Product	Origin	Volume	Period	Price	Incoterm
Gouda 48 Slicing	NL/DE	88	December	€ 4000	FCA NL/DE
Mozzarella 40%	NL/DE/BE/DK	88	December	€ 3800	FCA NL/DE/BE
Emmental	NL	22	December	€ 4700	DAP NL
Gouda 48 Slicing	NL/DE	132	Q1	€ 4000	FCA NL/DE
Mozzarella 40%	NL/DE/BE/DK	66	Q1	€ 3800	FCA NL

Powders: Boring? Or Reliable?

Last week, we had extensive discussions with a few of our buyers about the market. After peaking above €2600 for a few weeks, the market is back to its €2400 level (for older materials) and €2600 (for fresh exportable material). Prices for non-standardized SMP are hovering roughly between €2525 and €2650 again (depending on origin and protein level). We’re still seeing some wide gaps in the FCMP market. We brokered a deal for UK FCMP at €3950, while most partners still expect to see €4300 levels for EU material.

The almost predictable range of SMP prices is leaving some of our partners slightly annoyed. Traders thrive on high volatility, and aside from a few surprising moves, the powder market’s volatility index seems remarkably low. That might seem mind-numbing for traders, but for buyers who depend on powders in their end product, this steady market provides a reliable component of their cost price.

Cheap SMC over the Christmas weeks is adding a bit of spice to the debate over whether SMP can trade even lower. We hear prices for SMC as low as €1800, suggesting SMP production costs below €2300 are possible. In our view, this would only create a short window of opportunity for some to capitalize on low SMC prices. If, after Christmas, the SMC market remains as low as what we’re hearing today, we think Q1 might trade lower for a longer period, testing the lower end of the range for fresh exportable goods.

We expect the market to open with the following levels.

Product	Origin	Volume	Period	Price	Incoterm
Skimmed MIlk Powder MH	Solarec	100	Jan	€ 2630	FCA BE
Skimmed Milk Powder MH	French	50	Dec	€ 2525	DAP NL
D40	Spanish	100	December	€ 1025	FCA SP
Skimmed Milk Powder, Fresh	IE	200	January	€ 2550	FCA IE
Skimmed Milk Powder 38%	EU	200	December	€ 2675	DAP NL
Skimmed Milk Powder 36%	EU	100	December	€ 2550	DAP NL

We would have the following bids

Product	Origin	Volume	Period	Price	Incoterm
FCMP BigBags	EU	96	January	€ 4000	FCA NL
Skimmed Milk Powder n 36%	EU15	44	December	€ 2400	DAP NL
SMP BC Spec	EU	300	Q1	€ 2500	DAP BE
SWP Halal + Kosher	EU	50	Jan	€ 800	DAP IT