September Surprises

Today marks the first day of September. Normally September is never a dull month, and usually full of surprises. In 2021 September marked the biggest dairy rally ever seen in Europe, prompting the beginning of the butter price rally towards € 7500,- Cheese prices far above € 5000,- and powder prices above € 4000,-. But the year after September was the month when the market started to slow down and prices eased back toward today's levels. So will September be another make-or-break month for the EU dairy industry?

Now everybody is back from their holiday break, we should get a clearer picture of the remaining demand and the expected supply for the next 4 months. Demand usually exceeds supply in this period of the year, but with heavy stocks most partners seem to think the EU is well enough prepared to absorb the additional demand. We do expect prices for liquids to trade well above the cost-price for commodities, this should not ease back before the end of October. Those in need of fresh products for the next weeks should not expect to find low prices.

On the world market, we however face a different market. It seems supply performing much better, and demand is weakened so all eyes will be pointed to the export destinations. So far we haven't seen strong demand from the Middle East, and most of our partners don't expect a change in the next months. Tuesday GDT will be a real test for the world market. Speaking to our partners we see they are divided. We would say the majority is still bearish, but a small bounce is also expected amount many. Looking at the US we see the market on the CME is easing a bit as well after a strong rally in the summer months. Cheese and Butter prices are still quite okay, but NFDM prices have fallen back down to the lowest point since mid-July.

Another big influence on EU dairy prices are the EEX futures. We see our buyers and sellers sometimes react stronger to changes in EEX prices than to changing milk volumes or export figures. Therefore we think that the Dublin event mid September organised by StoneX might also have an influence on the sentiment. A key part of EU producers, end users and EU traders attend, all exposed to the same data, analysis and sentiment. It wouldn't be the first time that such an event has an impact.

All things considered, we think September should be a decisive month again for the direction of prices for the months that will follow. So after a few months of low volatility, we might see some increased volatility again!