A Weak Week?

Last week was a busy one, with commodity prices testing new lows. Though Thursday and Friday brought some stabilisation, there was no bounce like we’ve seen in past corrections. Only cream prices are keeping market sentiment from tipping fully bearish — and they might continue to hold firm. The hot weather across Europe could pressure milk production. Let’s be honest: when it's 37°C, our own output drops by more than 50%, so why expect cows to do any better? But aside from scorching heat and solid cream, the market lacks any real spark. With Tuesday’s GDT and lukewarm end-user demand, sentiment may stay soft through the week.

📆 H2 Kicks Off: What Have We Learned So Far?

Tomorrow marks the first day of the second half of 2025. H1 surprised us all, with prices moving far from where we expected. SMP failed to break its boring range and is now even testing the lower end. Butter, on the other hand, overshot forecasts by comfortably holding above €7000. Cheese? That one stayed true to script. We had expected high milk and high commodity prices to trigger more production and taper demand, but that didn’t materialise.

For H2, our expectations are lower. While it’s hard to see SMP going much lower or butter much higher, we also know: the market owes us no favours, surprises will come.

📉 GDT: Expect a Bearish Signal

The second half of 2025 kicks off with the GDT. We foresee a weak tender, especially when viewed through EU eyes. The exchange rate alone could shave off €150/mt in butter, even if GDT in USD stays flat.

Volumes are surging:

• SMP: +63% vs. previous, and another +80% coming
• WMP: +76% vs. previous, +50% upcoming
• Butter: +83%
• AMF: +119%

Many of these increases were forecasted, but the sheer size is daunting for a market lacking urgency. We expect fats on GDT to disappoint bulls. NZ butter futures signal a heavy correction. Solarec prices, which managed to stay above €7430, might only hold just above €7300 now. Kerry’s €7330 trades on the previous event could slip to €7150–€7250.

Mozzarella? Likely correction here, too. We’ve brokered parcels at €4000–€4100 recently with forward demand on these prices fading fast. A GDT result above €4050 would already be optimistic.

WMP sentiment is no better. Last week’s Pulse printed almost 2% down vs. the last event. Staying above $4000 is a stretch. SMP outlook? Also bearish. Recent Pulse trades were already below the last GDT, and in the EU, €2300/mt is no longer a given. Most trades in our book are already below it — even for fresh product.

Add it up:
A weaker USD, slower EU demand, lower trades on all commodities via our books, and more volume coming online in a sleepy market. Not exactly the recipe for a bullish kickoff to H2.

☀️ Heat Wave Might Tighten Spot Liquids

Zooming back to the EU and the spot market for liquids, we’re not as bearish here. Europe’s heating up fast this year. Heat stress is no joke, and we expect milk intake to drop in key regions like France, Belgium, the Netherlands, and Germany. That should tighten spot liquids and could give prices a short-term lift.

But don’t get too excited. Forecasts show cooler weather (20°C) and rainfall returning by Friday.

Also, let’s face it: over 35°C doesn’t just reduce milk output — it alters consumer behavior. Yes, our son still demands his double-scoop ice cream daily. But my wife and I are skipping the cheese sandwich in favor of tuna salad with sundried tomatoes and pickles.

🧈 Butter: Who Will Blink First

The butter market is back in Mexican standoff mode. Buyers are gone, sellers are waiting them out. Though stocks are low, seller confidence is thinning. July is typically peak stock month, and this year’s will be the most expensive stockpile ever. Cooperatives paying 55+ cents to farmers still need to finance those inventories.

Some producers have accepted Q3 bids at €7150–€7250 — slightly below expectations, but hardly fire sale territory. The big question now: are sellers done, or will more volumes follow? If so, even high cream prices won’t rescue them. And they’d better hurry, a bearish GDT could chase remaining buyers off the table. We give sellers 2–3 weeks max before market activity goes quiet and reawakens post-summer.

On the bullish side: end users still haunted by their 2024 mistake (going on holiday uncovered for Q4) might return soon. If so, Q4 demand could lift prices toward €7500–€7600, some seem to think. So… who blinks first?

Last week, GFD traded Q3 NL/DE/BE around €7200, Q4 just below €7300. Irish butter traded €25–€50 lower. Sellers didn’t push more volume, but buyers didn’t bid up either.

🧀 Cheese: Where Are the Buyers?

Cheese needs one thing: buyers. Supply is no issue. Producers are offering July and August volumes — and even tempting with September — to lure demand forward.

The price drop is hard to explain. Production data shows more milk diverted to butter and SMP, less to cheese. So… the issue must be demand.

Retail shows stable volumes. But foodservice? Complaints of slow sales persist. The biggest groans come from exporters, especially in Gouda, Cheddar, and Mozzarella. The EU seems to have lost meaningful volumes abroad — and they’re staying here.

Retail and foodservice have been discounting for months, but buyers haven’t returned. Until they do, prices won’t either.

Short-term, we expect more softness. Nearby volumes of Gouda and Mozzarella keep appearing. Tuesday’s GDT will test the floor. If Mozzarella drops below €4050, EU spot might slip under €4000.

🌫️ Powders: GDT Won’t Save This Party

Can we end on a postive note? Let’s not pretend. SMP prices are still softening. FCMP/WMP show no upward momentum. SWP drips down a few cents each week. And GDT? We’re bearish.

Short version: powder prices will likely head lower after Tuesday’s GDT. Until then, sellers remain hopeful — because frankly, there’s little downside to waiting. Prices are already low.

But if GDT powders drop more than 3%, the market may break trend and seek new lows. It’s not a rosy view, but the books show this clearly: sellers outnumber buyers, and those buyers are only poking around if prices drop significantly.

So… they probably will.

🔚 Final Thought: No Bounce, No Breakout, No Bias

If H1 taught us anything, it's that logic rarely dictates this market. Q2 offered plenty of reasons for a bounce, but it never came. Now, as Q3 starts, sentiment feels fatigued. Demand is weak, the GDT outlook is poor, and sellers are twitching. But don’t confuse the absence of optimism with a crash. We’re not breaking, just bending. And in dairy, that’s often where the next move brews.