The Price of Dairy is € 3600

This week started off relatively slowly, although with 250mt of powders and 132mt of butter traded, we have seen quieter Mondays. The funny thing is that the November price is starting to blend for almost every dairy commodity we broker. Someone offered us 2 loads for November at € 3600. Can you guess which product he offered us? Was it Gouda? Edam? Mozzarella? Irish butter? NL/DE/BE butter? SMP non-standardized, or Codex with export docs? Some loads of Emmentaler? In all honesty, it could have been all of the above. What did this partner offer? You will find the answer at the end of the update!

But it’s funny how markets can change over a short period of time. Last year we were discussing intervention bags for SMP, and producers were expecting a bounce in butter prices back towards € 6000. Gouda and Mozzarella prices were diving below € 3000, while cheddar prices were holding relatively firm. And while spot prices for November are now all converging close to € 3600, we all know that the probability of those prices changing over the next weeks is gigantic.

We continue to look to the US, as it has proven over the last 18 months to be a good indicator of what the EU is about to endure. With SMP prices hitting fresh highs and butter prices hitting fresh lows, the direction of both commodities remains up for protein and down for fats. In the US spot butter prices sit well below € 3000 and protein prices well over € 4000 And cheese prices? They bounce a bit up and down, above butter prices, similar to the EU.

Butter: Stable after a drop

Butter prices dropped significantly last week, and this week we expect the market to stabilise a bit around last week’s lows. Even bearish butter markets need a bit of time to cool down and can’t drop € 100 every day. Our lows last week came in at € 3600 for Q4 NL/DE/BE butter. In Q1 we saw € 3725 as the lowest trade, Q2 at € 3925 and Q3 at € 4150. Today our Q3 market traded up € 40 a mt to € 4190, while the rest of the markets remained stable.

We would still expect butter prices to trade at a similar spread below SMP prices as they do in the US. Even the producers we speak to are saying that today’s forward curve, with SMP Q1 at € 3700 and butter at € 3750, gives a better milk price return than last year, when butter still traded at € 5000+. If the outlook for fat remains grim, we expect producers to start striking more butter/SMP deals to secure a decent milk price for their farmers. And if SMP prices hit € 4000? Expect butter to be happily sold at € 3500. Is € 3500 the bottom? Some seem to bet on it. We would take the opposite side of that bet.

Our markets today are expected to start as follows:

Period	Product	Bid	Offer
Oct–Nov 2026	NL/DE/BE fresh/frozen	–	€ 3600
Dec 2026	NL/DE/BE fresh/frozen	€ 3500	€ 3650
Q1 2027	NL/DE/BE fresh/frozen	€ 3700	€ 3775
Q2 2027	NL/DE/BE fresh/frozen	€ 3900	€ 4000
Q3 2027	NL/DE/BE fresh/frozen	€ 4150	€ 4200

If fresh max 30 days, if frozen max 6 months old.

SMP: Breaking the final resistance

Our inner butter bear might see the bottom of the market coming closer. But our inner powder bull is only slightly getting started. We brokered some fresh SMP for November at € 3600, but it feels like buyers are only slowly starting to accept the higher prices. If the market collectively surrenders, we expect prices to make the jump over the € 4000 mark. As one partner correctly stated: SMP stocks in the EU are nearing all-time lows, the US is empty, NZ is now starting to sell the back end of its milk season, China looks empty, Algeria looks empty.... The world needs to start buying, and Europe has product to move. 

We would like to point again to the SMP stock situation in 2018–2022. EU SMP stocks went from an all-time high 480kmt to an all-time low in three years. Over 440.000mt disappeared within a relatively short timeframe. To put today’s stocks in perspective: in 2018 the EU reduced its stocks by 170.000mt in 9 months, and by another 120.000mt in the 6 months after that. Once the EU becomes exportable, stocks can melt away quicker than anyone could imagine.

With estimated stocks just over 90.000mt, the EU could be scraping for stock within the next 3–6 months. And if that happens, no forecast can point to where the top is. The US is showing that spot prices at € 4300 are not a barrier yet. Cheaper alternatives like whey powders, which gave the market an alternative in the previous rally, are part of the reason SMP proteins are gaining traction. SMP is the "cheap" alternative for the expensive protein market. With all these dynamics in place, it’s hard to see where this market will top out. But it seems very unlikely that € 4000 will act as a ceiling.

Our opening offer markets:

Volume	Product	Period	Price	Terms
100mt	Spanish SMP, exportable	Fresh	€ 3600	FCA Spain
100mt	Ukrainian SMP	–	€ 3700	DAP NL
100mt	Polish SMP, non-standardized	–	€ 3725	DAP NL
100mt	Belgian Codex	July or fresher	€ 3625	FCA Belgium
200mt	Belgian Codex MH	Nov/Dec	€ 3650	–
200mt	Belgian Codex LH	Nov/Dec	€ 3675	–
100mt	German Codex MH	November	€ 3700	–

Cheese: The stable one

If you’re looking for a stress-free life, become a cheese trader. Or at least that’s how it looks from the sidelines. Prices are moving in a very tight range, and making a mistake seems almost impossible. But so does making a margin, it seems. We spoke to a trader today who said that even in hindsight he couldn’t have made a margin on the cheese trades. That’s a telling sign.

We continue to see interest to sell Gouda and Mozzarella just over € 3500, with bids just below € 3450. And even with a full-time cheese broker on it, that’s roughly all we can tell about the markets. No big demand to fulfil, no large offers to get rid of, just a very, very, very well-balanced market.

Product	Bid	Offer
Gouda / Mozzarella	just below € 3450	just over € 3500

Final note

As promised, the answer to this week’s riddle: the 2 loads for November at € 3600 were 2 loads of Irish Lactic Butter. Did you guess right? If not, don’t worry. At € 3600, every dairy commodity looks the same for now. Enjoy the week.

GFD, Good trading 🤝