GDT: Fuel for Protein, More Pain for Fat?

Last week, to our surprise, was a very active one. With over 3,500 MT changing hands across butter, SMP and some loads of cheese, the market is finding its Q4 momentum. Even today the market traded over 500 MT, unusual for a GDT Monday. The fat market continues to be bearish, with NL/DE/BE butter trading today at €3,875 for Q1 and €4,100 for Q2, and offers being added to the pile. On protein, the sentiment is firm and offers get revised higher almost daily. Real confirmation from trades stays limited to small volumes on our side, but each one gets closed slightly higher. And the cheese market? It remains stuck in a very tight range.

This week is a GDT week, always a week where activity stays limited and partners expect to find confirmation in the tender results. Though the tenders sometimes throw in a surprise, on some products the result always falls in line with the market we have been trading in the days running up to it. But this time it feels like the tender could give an extra pull to the bearish fat market, an extra boost to the firm protein market, or both.

GDT: What We Expect

Looking ahead to this week's GDT, we expect all fat products to be pulled down. Even though we are in the high-demand season, the market doesn't feel like it to us. Looking at AMF first, it feels like prices have been trading relatively high against butter, given that we have seen the two trading much closer to each other. We would expect a small correction of 2-3%.

But the real correction should come from butter. Although the last Pulse showed a slight bump, worldwide sentiment on butter feels very weak. Since the last tender, CME and EEX have taken some big steps down. For NZ fat we would expect a 3-4% drop. For EU fat (Solarec), we would expect prices to come down to the €3,800 region for November, €3,900 or slightly lower for December and €3,900 or slightly higher for January. And this is us being optimistic...

Then cheese. Cheddar jumped 16.5% last time... that should be corrected down, maybe with a similar move. But given the extreme outcome, making a good forecast seems impossible. Mozzarella should be a bit boring this time. We would see the mozzarella market between €3,400 and €3,500, and given the last trade at €3,470, we wouldn't be surprised by a result between -1% and +1%.

Then WMP and SMP: the two biggest commodities, and the two hardest to predict. SMP futures on SGX are nearing the $4,000 level, and once that level is broken, it can act as strong support for the market. SMP futures on EEX point to much higher trades here in the EU as well. But from our side, either physical trades have been on the low side or futures are on the high side. Our physical market is stuck between €3,350 and €3,400 for codex, while non-standardized trades are hard to lock in above €3,500. If the futures markets are any indication of where the GDT will trade, we expect SMP prices to rally 6-10%.

WMP prices are our blind spot. We hear Algerian buyers prefer to buy more WMP than SMP, as WMP offers better value from some origins. If true, the WMP result might be the most surprising one. We would lean bullish on WMP and expect the result to stay below SMP, but still up a few percent on the last GDT.

So, weaker on AMF, butter and cheddar, stable on mozzarella, and bullish on SMP and slightly on WMP. This week's GDT might give the market confirmation of the direction it is already taking. That could get fat sellers back behind their phones, and SMP buyers back behind their emails, trying to confirm the deals that can still be made.

Butter: Continued Pressure

As mentioned, the butter market continued its downward trend. In our last update we wrote about butter still trading at €4,050 for Q1 and €4,250 for Q2, and that was on the first of October. Now the last trades are €3,875 for Q1 and €4,100 for Q2, with no bids left at those levels. We see offers from Ireland coming down even lower, and partners claim to be buying at €3,830 EXW or €3,900 DAP France. We even received offers at €3,850 DAP France for Polish/Irish sweet/lactic butter.

There's nothing new to say about why prices are falling: absent end-user demand for Q4, dropping cream prices in October, full warehouses, traders unable to set up new cash-and-carry trades from Q4 into Q1, and lower offers on futures. The latest milk figures from the UK show fast-recovering milk volumes, and we hear the same from Ireland. Apart from a bit more export demand, the feedback from the market remains undeniably bearish.

Our opening market for NL/DE/BE butter:

Period	Bid	Offer
October	€3,650	€3,775
Q4	€3,650	€3,800
Q1 2027	€3,850	€3,875
Q2 2027	€4,050	€4,125

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

Powders: Creeping Higher, Expecting a Boom

The powder market continues to trade higher and higher, but the steps are small, and so are the contract quantities. Normally the market doesn't show much activity before a GDT, and this week is no different. If the tender results end up at the high end of our forecast, we expect the EU market to take a big step up. The market continues to feel nervous, with buyers ready on the sidelines.

Current offers:

Period	Volume	Origin	Quality	Price	Terms
October	200 MT	Belgium	Codex, June or fresher	€3,400	DAP NL
Q4	150MT	Germany	Codex	€3,450	FCA
October	48 MT	Poland	Non-standardized	€3,450	FCA
November	100 MT	Ireland	Non-standardized	€3,550	DAP NL
November/December	200 MT	France/Belgium	Low heat	€3,490	FCA

Cheese: Stable (Looking Down)

Last week a few smaller cheese deals passed through our books. With a few Gouda trades around €3,500 and mozzarella slightly lower, the market feels very much in line with the weeks before. Yes, fat feels slightly weaker, but cheese prices are far from collapsing. Buyers and sellers are happily waiting for market direction.

We would see the Gouda market for October through December/January around €3,500 offered, but buyers are not willing to lock in forward trades while the market feels hesitant. Mozzarella and cheddar are much the same. At spot levels, it feels like sellers are happy to lock in forward trades, but buyers will only engage when they are given a discount.

Without any market movement to confirm it, we would still say the cheese market has a more bearish face. But not an aggressive one.

Final Note

All in all: fat lower, protein higher, and cheese waiting for someone else to make the first move. The tender will show whether the market agrees with us. Looking to sell fat, cover protein or just talk through the result? Give us a call. We'll be behind our phones all week.

GFD, Good trading 🤝