Sentiment Sours as Fundament Fade

The market direction is becoming more and more difficult to bring in to words to us. Fundamental data shows a bullish environment for powders and fats, but the traded direction looks more like a bearish trend. Butter prices keep trending lower, and bears expect a total collapse over the next weeks. But their expectations are largly fed by speculation, not by facts. On cheese, we continue to see a lack of activity, suggesting spot demand is a bit weaker than many anticipated. But the market doesn't seem to trade in a clear direction. In this market, stories thrive while data follows slowly to confirm the tales our partners tell each other. Sentiments sour, while the fundamental analysis fades to the background.

Looking at the market for liquids, the market starts slow. We do see a bit more sellers for cream looking to lock in sales for the end of the year and Q1. Offers for cream for weeks 51-52-1 start around €8900, and for Q1 we even see offers below these levels. Compared to the last prices of last week for spot, these prices seem low, but try to make butter out of it, and many still find them expensive. Raw milk prices also trade well below the spot market, with prices in Germany and France reported for mid-Dec until mid-Jan between 45ct and 50ct. SMC prices remain steady around €2300 levels.

We have gotten quite a bit of feedback on our outlook for the milk collection next year. The Irish think we are overly bullish expecting them to gain 2-3% next year, but that would still put them on par with 2023. We think that is a realistic forecast to have. Our expectations that the Dutch milk supply should grow in the first 6 months of next year also got some highly debated feedback. We aren't bullish on the Dutch long-term dairy outlook, but short term we still believe we can see some recovery due to high milk prices.

Butter: Last Minute Highs and Forward Prices Fade

The butter market continues to have two faces. For close by we still hear prices well over €8000 for fresh sweet cream butter for prompt loading and specific origins. But butter available after the 10th of December quickly loses the interest of our buyers. Product to be loaded between the 10th and the 31st of December even got to be discounted as buyers do not want to carry the product on their balance sheet at year end. Q1 prices meanwhile continue to trade lower. We brokered some business at €7250 and saw futures for February and March even trade lower. Q2 prices on futures continue to trade at €6850, keeping the €1000 backwardation between spot prices and Q2 enormous.

Our bullish glasses have come off in recent days as we also need to acknowledge that the 6 months in front of us probably will give us more butter than the market needs for immediate us (as it should), and at these prices we see nobody incentivized to stock up (although they should). In addition, we see the strength of the cheese market fading a bit, taking away one of the big contributors to the tight butter market (a well-demanded cheese market). But we continue to warn our partners that the lower this market goes, the higher it will trade in the second half. We should see strong support from the industry once prices trade between €6000 and €6500 in Q1 and Q2. But until then, a sharp decline in butter prices is to be expected.

We start the day with:

Product	Origin	Volume	Period	Price	Incoterm
Lactic Unsalted Fresh/Frozen	Irish	88	December	€ 7550	FCA NL
Sweet Cream Unsalted Frozen	Portugues	44	Nov-Dec	€ 8000	FCA PT
Sweet Cream Unsalted Frozen	Irish	44	Dec	€ 7850	FCA NL
Lactic Unsalted Fresh/Frozen	Arla DK	66	Q1	€ 7250	FCA NL
Lactic Unsalted Fresh/Frozen	NL/DE/BE	66	December	€ 7850	FCA NL
Lactic Unsalted Fresh/Frozen	NL/DE/BE	132	Q1	€ 7275	DAP NL

We Expect to have Buyers for

Product	Origin	Volume	Period	Price	Incoterm
Lactic Unsalted Fresh/Frozen	Irish	88	1th half dec	€ 7300	FCA NL
Sweet Cream Unsalted Frozen	Portugues	44	Nov-Dec	€ 7400	FCA PT
Sweet Cream Unsalted Frozen	Irish	44	Week 49	€ 7400	FCA NL
Lactic Unsalted Fresh/Frozen	Arla DK	66	Q1	€ 7150	FCA NL
Lactic Unsalted Fresh/Frozen	NL/DE/BE	66	January	€ 7200	FCA NL
Lactic Unsalted Fresh/Frozen	NL/DE/BE	132	Q1	€ 7200	FCA NL

Cheese: Melting Mozzarella Prices

The cheese market continues to be a silent market. Speaking to many partners, it seems nobody really needs anything. Buyers have covered their needs, and most have to work through some old "expensive" stocks first. Meanwhile, the mozzarella market starts to really feel the pressure. With the problem that stocking mozzarella is difficult, pressure might build up fast. Prices for December have come off from €4300 three weeks ago to offers below €4100 yesterday. Gouda and Edam prices seem to hold up a bit better, but traction with our sellers is also low.

On the cheddar side of the market, we continue to see a slightly weaker market without really seeing sales pressure. It's mainly product from Ireland and the UK for this year loading that is putting a slight bit of pressure on this market. The expectations for next year aren't great either, although sellers prefer to wait and see first before attacking the market with lower prices.

We expect to start the market with seller for:

Product	Origin	Volume	Period	Price	Incoterm
Gouda 48 Slicing	NL/DE	88	December	€ 4500	FCA NL/DE
Mozzarella 40%	NL/DE/BE/DK	88	December	€ 4100	FCA NL/DE/BE
Cheddar	UK	44	Dec	€ 4800	FCA UK
Gouda 48 Slicing	NL/DE	132	Q1	€ 4425	FCA NL/DE
Mozzarella 40%	NL/DE/BE/DK	66	Q1	€ 4150	FCA NL

We Expect to have Buyers for

Product	Origin	Volume	Period	Price	Incoterm
Gouda 48 Slicing	NL/DE	88	December	€ 4200	FCA NL/DE
Mozzarella 40%	NL/DE/BE/DK	88	Nov-Dec	€ 3800	FCA NL/DE/BE
Cheddar	UK	44	Dec	€ 4500	DAP NL
Gouda 48 Slicing	NL/DE	132	Q1	€ 4100	FCA NL/DE
Mozzarella 40%	NL/DE/BE/DK	66	Q1	€ 3900	FCA NL

Powders: Oh Oh ONIL

Yeah, it got announced, the ONIL tender! What has been hovering over the market for days is now official. The first thing we see is that most partners expect the lion's share to be taken by Belarus and the rest probably by Mlekovita and the other Polish producers. The tender is for late Q1 and early Q2 deliveries, making us question the immediate effects on the market.

Overall, our market outlook for powders is stable. The overhyped ONIL tender, the majority of bullish partners combined with a bit of stock make us think the possibility for higher prices is mainly fed due to higher prices in the US and NZ and a stronger dollar. But from EU perspective we don't believe that we should be overly bullish yet.

We expect to start with the following market.

Product	Origin	Volume	Period	Price	Incoterm
Skimmed MIlk Powder MH	Solarec	100	Jan	€ 2725	FCA BE
Skimmed Milk Powder MH	German	50	Dec	€ 2725	FCA SP
D40	Spanish	100	December	€ 1025	FCA SP
Skimmed Milk Powder, Fresh	Solarec	300	Q1	€ 2800	FCA BE
Skimmed Milk Powder 38%	UK	200	December	€ 2700	FCA NL
Skimmed Milk Powder 36%	EU	100	November	€ 2650	DAP NL

We would have the following bids

Product	Origin	Volume	Period	Price	Incoterm
FCMP BigBags	EU	96	January	€ 4220	FCA NL
Skimmed Milk Powder n 36%	EU15	44	November	€ 2550	DAP NL
SMP BC Spec	EU	300	Q1	€ 2650	DAP BE
FCMP	IRL	24	December	€ 4300	FCA NL/BE

Final Thoughts

After analyzing the current market conditions, it's clear that uncertainty is the prevailing theme across the dairy sector. The divergence between bullish fundamental data and bearish trading trends suggests that market sentiment is overriding underlying realities. Buyers and sellers alike seem hesitant, with many awaiting more definitive data before making significant moves. The potential oversupply in products like butter and the softening demand in the cheese market indicate that prices may continue to face downward pressure in the short term. Market participants should remain vigilant, focusing on strategic planning and staying responsive to rapidly changing conditions as we move into the new year.