Dairy Direction in Dublin?

Last week the market already felt like it was waiting for a new impulse. Our cheese partners, seemingly all bullish, are waiting for bullish buyers to agree with them. Our bullish powder partners are comfortably waiting for buyers in need to help them out of their comfortable stocks. And in butter, most partners seem to be nervously tracking the price of cream as a spiritual guide, hoping it leads them to salvation.

We have seen this before: markets full of bullish sellers that keep rallying, just as we have seen bear markets flooded with needy buyers, on a relentless downward price path. But be aware, the more convinced a market is, the more volatile it tends to get, because everyone is running the same strategy. And if those strategies fail, stall or lead to nothing? Travel to Dublin. At the StoneX event you may not only find yourself confirming your market bias alongside some old friends, but also some good drinks, warm conversations and a fair amount of laughter.

We look forward to this week, travelling and meeting our market partners. For all our cheese readers: Joey will be there. If you would like to meet the man in person, reach out via joey@getfairdairy.nl. Linda and Wouter will also be in Dublin, reconnecting with their butter and powder partners. Want to know more about our Market Place? The dashboard? Market insights, data sets? Or simply how we manage to look this good in our AI-generated photos? Grab us by the jacket.

We are keen to hear what the market is making of the current dairy fundamentals. We have had years where our view was clearly directional. Today's markets show uncertainty across all commodities. With a gun to our head we would call butter still oversupplied, cheese topping out and powders on a clear plateau, waiting to break another leg higher. But that is with a gun to our head. Take away the gun, and you take away our opinion.

Butter: fundamentally bearish, sentimentally volatile

This butter market looks heavily oversupplied, yet fear of rising prices has pushed it higher several times over the past 18 months. Take away fear and FOMO and it should trade sideways in a €3,800 – €4,500 tunnel for the coming months. Look at the last 14 days [since our start → since the summer break?]: Q4 went from €3,950 up to €4,300 and back down to €4,025 last week. Q1 ranged between €4,000 and €4,400, and our mid-market yesterday settled at €4,250.

These rallies are fuelled by nothing but fear. During the summer, the first heatwaves caused a €700 jump in Q4 before prices traded all the way back. Then all it took was two weeks of expensive cream to pump them up again. The fear cycles are getting shorter and less intense, and more participants are becoming immune (which in itself leaves room for a more fundamental bull run). But a short-term supply disruption still sends buyers across the full curve to the buying desk, scaring away sellers just as quickly. With cream back from €5,500+ to last Friday's €4,700, the calmer market has returned. The spot market for butter dropped back below € 4000, Q4 trades just around these levels and Q1 ... it still shows elevated prices between € 4200 and € 4300. Give cream a push higher over the next few weeks, though… and we buckle up again for intense swings.

Cheese: production tells us we can't go higher

Looking at the cheese market, it doesn't feel like it can trade much higher. And let's be honest: with prices dropping below €3,000 before summer, we have since seen a 20% increase. That is impressive. In our cheese book we continue to see more sellers than buyers, and here and there confirmation trades are getting locked in at lower levels. But with most partners very comfortable on the sales side, it doesn't feel like the bottom of this market is about to collapse either.

What we do see is a market that has produced significantly more cheese than in other years. With the current push for whey proteins, cheese has become a bit of a side hustle for some. Exports have always been a healthy valve for the EU market; the question is whether they can remain that valve. Looking at international prices, we are sceptical that cheese exports can sustain at this pace, especially on cheddar.

Gouda/Edam offers sit between €3,500 and €3,550 spot and around €3,650 – €3,700 for Q4. Mozzarella sits in roughly the same range. Asking prices for cheddar curd went up, but the bids haven't caught on so far. And when we needed some cheddar for prompt, offers came in between €3,600 and €3,650 for UK/Irish, with our buyer able to beat those levels. As said: this market feels topped out, but not ready to step down just yet.

SMP: On a plateau, waiting for the next leg

The powder market is more or less where we left it last week: the trade has bought, and is now waiting for end users and export markets to agree with them at the higher levels. Some volume moves for immediate needs, but the larger export tonnage isn't showing up yet. Offers meanwhile stay firm. With enough open demand in Europe, both feed and food, plus export, sellers see little reason to step back.

Futures hold their stance. EEX SMP sits around €3,160 for Sep and €3,265 – €3,290 for Q4, CME NFDM around 179¢/lb Sep and 182¢/lb Oct, SGX SMP around $3,630 Sep and $3,710 – $3,770 Oct/Nov.

Buyers didn't enjoy the fast move towards €3,250 – €3,300+, and new levels take time to be accepted. There is buying interest, but for what is really needed, not for forward cover. The strategy from powders remains opposite of that of butter buyers. Instead of buying fearfully 18 months forwards, powder buyers buy hand to mouth, hoping for a price drop. For us, this is the real recipe for much higher levels. 

China is the one to watch. Chinese buying had been slow and stocks were run down, while delivery issues at domestic SMP producers and buying by the larger processors tightened local availability. That brought China back into the recent auctions, even if import arrivals may not show a real YoY recovery before November. For Europe this matters: if China keeps taking good volumes from Oceania, NZ has an outlet for its seasonal peak. If Chinese buying slows again, more NZ product lands on the wider export market, in season and with a tariff advantage into parts of SEA. That is competition Europe can do without.

The US is the other half of the equation. As long as Mexico keeps absorbing US volume, Europe is still needed for a meaningful part of the remaining export demand. Ramadan isn't fully covered yet, and NZ is getting harder for some Middle Eastern destinations given sailing times and the current logistics.

Final note

Three markets, one mood: everyone is convinced, nobody is trading. Butter waits for cream, cheese waits for buyers, powders wait for exports. Markets like this don't drift for long. They resolve with a move, and the more crowded the view, the sharper it tends to be. So position for volatility rather than direction; keep some powder dry, cheese fresh and butter defrosted. 

And if your strategy still fails this week, at least you'll might be in Dublin. Come find us at the StoneX event. We'll have the arguments; you bring your bias.

GFD, Good trading 🤝