Butter and Protein at Parity

Yesterday was again a very active day on our side of the market. With over 1,200 mt of butter, smp and cheese trading hands, the October activity feels similar to last year's activity. The fat side of this market continues to look very depressed. In our Tuesday morning update, Q1 butter was still reported at €3,875 on Monday; yesterday it found a new low at €3,725. For Q2, prices dropped from €4,100 to €3,950, with more offers at the same price, and Q3 dropped to €4,180, coming from € 4300.

The pressure comes from producers joining the offer side of the market, still for this year loading and now also for next year. And after giving away the premium to traders for the past eight months, some producers now feel comfortable enough to start offering the forward curve as well. We hear producer prices for Q1 between €3,750 and €3,800, while Irish butter is reported to have traded at €3,600 FCA Ireland.

On the cream side of this market, we continue to see downward pressure. Cream prices started yesterday morning around €4,600 FCA West EU, but by the end of the day we heard prices as low as €4,400, and some even at €4,300 for spot loads. Most other liquids continue to trade stable to firm, with SMC prices back above €3,100 and in some areas even as high as €3,350.

Tuesday’s GDT wasn’t as bearish for NZ fat as we had expected, but for EU fat it came in spot on where we had forecast it to trade. SMP prices for EU product made the jump higher, and so did WMP prices. NZ SMP prices rallied slightly less than we had expected. On the mozzarella side, we thought the result was a bit disappointing. The event reflected the same dynamics we see everywhere: strong momentum on proteins, weak momentum on fats.

Butter: GFD spot €900 below the French quotation

Looking at the butter market, we traded our lowest price for October at €3,600. That’s €900 below the French quotation, which still publishes €4,500+. Even the Germans still report €4,150, which seems strange given that we have seen offers from German producers well below €4,000. Their delay in forming an adequate quote is becoming a bit of a joke.

We continue to see selling pressure on the full curve, and buyers just aim lower after every trade. Still, it feels like the market has room to go down, as most producers have yet to start confirming business. But just like last year, keeping up with a fast-falling market is difficult. We expect the next couple of days to be a bit calmer, with more pressure to come at the end of the week, on Friday.

Looking at the US, there simply seems to be no bottom for fat. And judging from what we hear, that pressure won’t ease over the coming months. The US is expected to come to the export market more aggressively for fats, and not only butter. This is capping the EU’s export capacity, keeping more product within the EU.

Our opening markets should look something like this (USLB NL/DE/BE fresh/frozen, per MT):

Period	Bid	Offer
October	€3,500	€3,600
December	€3,500	€3,650
Q1 2027	€3,700	€3,750
Q2 2027	€3,875	€3,925
Q3 2027	€4,100	€4,200

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

Powders: steadily trading higher

After Tuesday’s GDT, we continue to hear of and see higher trades on SMP. We traded 100 MT of Belgian-origin SMP medium heat at €3,450 DAP NL, and at €3,500 we traded Ukrainian SMP for November. Partners claim to be selling Solarec SMP above €3,600, and even the feed market is trading at €3,575. Futures for next year are trading above €3,600, and we keep hearing of more and more demand flowing into the market.

Again, looking at the US and NZ, we see futures prices on the rise. US NFDM futures for Q4 are well over $4,400/MT (€4,000), and the CME spot call is nearing $5,000/MT ($2.25/lb).

As one partner described the EU market: “It feels like a balloon held under water, and every day more air is being pumped into it.”

For us, it’s not a question of whether this EU market is going to test the €4,000 level, but a question of when, and for how long.

Opening offers:

Period	Origin	Product	Offer	Terms
October	Belgium	SMP MH Codex	€3,500	FCA Belgium
October	Poland	SMP MH non-standardised	€3,500	FCA Poland
October	Germany	SMP MH Rücker	€3,500	FCA Germany

Cheese: boring sideways

Cheese trading is boring and sideways, with only a small deal done in mozzarella. We see buyers and sellers unsure of what to do. The worldwide sentiment on fats should weigh on cheese, but looking at the age of EU cheese stocks, there seems to be limited reason to expect full-on pressure. The market feels fairly balanced and will probably continue to trade that way.

Final note

Yesterday was an exciting day on our end. With powders trading higher and butter trading significantly lower, the butter market is now at parity with the SMP market: NL/DE/BE butter and premium SMP brands traded at the same price, €3,600. Judging by today’s sentiment on both commodities, we can be fairly confident that butter prices will continue to trade lower, while the top for SMP feels far from reached.