Fats show FUD, Proteins show Power

Again, it was a hectic day on the commodity market with a lot of transactions on both fats and proteins. But there are some differences between the sentiment on proteins and on Fats. Because the expectations for SMP start to take on serious forms of a bullish continuation, but for butter, the heat is leaving the market and we see some Fear Uncertainty and Doubt (FUD) about the sustainability of these high prices. And as we are exhausted from a long day of intense brokering, we keep our update short and simple today. 

We know that butter is always the most volatile product of the different dairy commodities and those who trade Butter on CME might understand why. But also in the physical market, we continue to see big swings in the moods among our partners on fat. Butter prices earlier in the week traded as high as € 4800, but now we see the low end of our range at € 4560 FCA NL. But those who look for special products (polish fresh) are still willing to pay prices above € 4800.

On the liquid side of the fat market, we also see some signals that we might have reached the highest point. Yesterday and in the morning prices of cream were still sky high, but during the day more trucks became available.  It seems those who need to buy their last trucks should be able to find them for around € 6400,-. The biggest push upward for cream seemed to come due to the fact producers who deliver to retail had to deliver lots of additional volumes on the "old" price, as the newly discussed retail price is set around € 5150,-. It is expected that demand for retail butter / and with that, for cream, might fall back a lot over the next 2-3 weeks. Add to that that the seasonal dip in some areas might lie behind us, and you have got yourself a market that could potentially trade back down to levels well below € 6000 within a few weeks.

But looking at the protein side of the market, we see a much more robust and firm sentiment. Buyers are looking to lock in products for closeby and further out. Prices on EEX are shooting up, and also for physical products, the market is paying more and more. We hear SMP Feed prices for Q4 are at € 2350,- and SMP Feed in H1 has traded at € 2500 even. But this seems nothing compared to the prices made on EEX SMP. We hear Dec-March traded at € 2750,-!

The cheese market is, at the same time showing still to faces. Yellow cheeses like Gouda, and Edam are hardly available, but Mozzarella and Cheddar have a much more visible availability. But with Gouda/Edam prices so firm and so little available, we would expect Cheddar prices to move back up. Because if there would be massive hidden stocks on Gouda and Edam we would expect that these higher prices would have shown a bit more availablity.

We traded most of our bids and offers of the previous days and see that most buyers and sellers are not sure what they want. We try to collect the newest bids and offers during the day and hope to share them with you at a later point in time.

So concluding from our view we see it as this. The butter market is clearly cooling down, and with less demand expected for the next weeks, we wouldn't be surprised if we would continue a slow but steady decline back to levels of 2 weeks ago. SMP prices will remain firm we think, especially with the GDT next week around the corner. GDT will set the tone for the next weeks we expect. From a personal feeling, we would expect the GDT results to be a bit disappointing, like the Pulse result. We keep hearing low-demand stories about China, so we doubt they will increase their bids again. For cheese we are torn between high Gouda prices and Low Cheddar prices, we do believe one of the two is wrong. If we had to guess we would say cheddar prices need to firm up a bit more as we think Gouda prices will remain strong.