Liquids Back in the Lead

The market gave us a friendly welcome back last week. A bit of bullish momentum across all commodities, supported by a tight spot market for liquids, and we closed out August with over 5,500 MT traded between butter, powders and… yes, cheese! Congratulations to Joey on booking his first deal. We wanted to celebrate, but Joey wanted to focus on a second one. We love the enthusiasm. The feedback on the dashboard has been overwhelmingly positive, and thanks to our most critical partners we've taken out the small errors. Haven't seen it yet? Have a look. You'll find our broker books, the latest market trades, our WhatsApp updates, updated prices on spot liquids and the swap proposals we're running. You can also share market intel you think adds value to the GFD community — and plenty more features are on the way. But enough self-promotion. Let's talk dairy markets.

And there's plenty to talk about. Spot liquids jumped on Wednesday. Raw milk has moved from 40–41 ct to prices reported to us well over 50 ct delivered. That is above most contract milk prices farmers are receiving, and you have to go back quite some time to remember when we last saw that. The move was supported by high cream, up to €5,500, and SMC up to €3,150. Simply separating the cream and selling it is currently the best return for the coops. By the end of the week we heard cream had come off again, down to €5,150, and yesterday it was reported slightly lower still. But cream above €5,000 — we lost some bets there.

These same liquid prices and volumes are where our most intense conversations have been. Last year the market handed farmers extremely good milk conditions, which pushed H2 production to the highest we have ever seen in Europe. The conditions for the next few months look a lot worse. Weather has been dry, feed costs are up, energy is up, pay-out prices are down, farmer margins are under pressure. Not a bullish setup for milk production. In the UK the numbers sit steadily below last year, around 4.5%, and are now dipping below the five-year average as well. The UK ran strong output through 2025, so a deficit on its own wasn't a problem — below the five-year average starts to look like a bigger one.

Our partner base is genuinely 50/50 on where milk output goes over the coming weeks. We see all the bearish arguments for milk, which are the bullish ones for price. But we have also seen farmers milk on far longer than we thought was financially viable. Another four to six months of good volumes would not surprise us. Feed that has already been bought tends to get used. A bit of rain may not save nature, but the fields around us are green again and the weather forecast looks good. We keep monitoring the volumes, but for now we lean towards the partners who think milk can keep flowing. And that is not necessarily bullish for commodities on the short curve.

Butter: Sentiment Following Cream

Butter sentiment has been bearish since we came back from summer break last year. More production, more milk, more imports — bearish on all fronts. Cream traded below butter equivalent for almost the entire year, which kept production close to maxed out. Now, for three weeks, that valorization deficit is gone. Cream sits well above butter, and the first signals are that butter production is down by roughly as much as it was up last year.

The question remains: is a bit less extra butter bullish for butter prices? Ok, it sure isnt extra bearish. The additional production from August–December 2025 versus August–December 2024 has been roughly 100 kmt. That is a lot. But remember what we are comparing it to: a year in which cream sat above €10,000 and butter production tanked to one of its lowest points in years, 2025 was a low production year for butter.

Still, if the EU produces 50–100 kmt less butter, that is a serious number. But don't forget that in the first seven months of 2026 the EU produced 125 kmt more than in 2025. From where we stand, the butter market fundamentally needs to produce around 100 kmt less simply to avoid collapsing under the weight of its own stocks, and closer to 200 kmt less to get tight again. Forecasting with a wet finger (is that an english saying?), we would expect the actual number to come in smaller than that, and by the end of Q4 the market should feel neither firmer nor weaker than it did in December last 2025 — when prices traded just below €4,000.

Meanwhile, sentiment can push prices higher than fundamentals justify. Cream sustained above €5,000 for the next six weeks will send butter towards €4,500. For Polish butter, those prices are already there. It isn't being paid for big quantities, but we hear the first spot loads going around at those levels. So follow the sentiment on cream, and you'll know roughly where butter sentiment is heading. Prices for NL/DE/BE butter are trading for Q4 between € 4100-4200, for Q1 next year between € 4200 and € 4300 and Q2 we would see between € 4350 and € 4600. 

Tomorrow is another GDT day, we would expect German Fresh butter to trade between € 4050 and € 4150 and Solarecs prices over the quarter between € 4100 and € 4250 max, a slight increase from the last tender. 

Cheese: Sellers Want to Test the Waters

The cheese market firmed up over the summer, but since then it seems to have found a bit of a break. Most of our partners are clearly very bullish — which usually means most of our partners have something to sell. And yes: our book shows more offers than bids. But nobody is chasing the buyer aggressively, and nobody is really willing to discuss the single bids we do find at lower levels. It feels like our sellers simply want to test the waters before prices firm back up again. We tested the lows before the summer, but we are far from where the highs would be if milk tightens even slightly. And in competing for milk, cheese valorization has to rise to keep up with butter and SMP — or more simply, with SMC and cream.

Gouda has been catching up with mozzarella fast. Whoever played the Gouda–mozzarella spread over the last weeks should be pleased with themselves. Gouda offers are now coming in between €3,550 and €3,650, while mozzarella offers sit around €3,650 to €3,750. If those numbers turn around over the coming weeks, we would not be surprised.

Tomorrow's GDT result for mozzarella should come in slightly below the last index trade. With more sellers at the last traded level, we would expect the tender around €3,600, or marginally higher at best.

SMP: Waiting for Confirmation

A much quieter start to the week, which is not really surprising with GDT tomorrow and after the sharp move of the past weeks. Monday mornings before GDT are rarely the most exciting, and at these levels most buyers seem happy to wait a day before showing their hand.

The underlying market stays firm though. We hear export business accepted around €3,150 ex for fresh European Codex SMP, and feed has traded at very strong levels — around €3,250 September and €3,275 Q4. If European product has to be sourced today, buyers increasingly have to accept the higher market.

Futures back that up. EEX Q4 sits at €3,335–3,350, another clear step up from last week. CME NFDM has moved higher as well, with September around 181¢/lb and October around 183¢/lb. At EUR/USD around 1.16, that puts CME at roughly €3,440–3,480/MT equivalent for Sep–Oct.

What's interesting is SGX. It's firm and considerably more active: October settled around $3,720/MT, November $3,750, December $3,780, with meaningful volume traded in October in particular. CME and EEX activity stays much thinner by comparison. So going into tomorrow's GDT, Oceania futures are certainly not signalling a weak market either.

The dollar has firmed slightly against the euro as well, from roughly 1.17 on Friday to 1.16 today, which gives European exports a bit more support again.

Fundamentally, not much has changed from last week. Open demand in Europe, in feed and in the export markets, while European producers still show little urgency to sell. At the same time prices have moved quickly, so it is quite understandable that buyers — export buyers especially — show some resistance and wait for tomorrow's GDT before committing further.

Yesterday felt like a market waiting for confirmation rather than a market losing momentum. Futures are firm, physical business has already shown that €3,150+ gets accepted, but tomorrow's GDT will probably decide whether buyers get comfortable at these levels or whether we first need a bit of consolidation. We would be more bullish on the tender results, although a +2% increase would be more in line with our view than another +7% for SMP. 

Final Note

So where does that leave us. Liquids are firm, cream is the driver, and butter is following its sentiment rather than its fundamentals. Cheese sellers are testing the waters without pushing, and SMP is waiting for a number that lands tomorrow. Everything on this page comes back to one question: does the milk keep flowing.

Our partner base is split down the middle on that, and we lean towards the side that says yes — for now. Feed that has been bought gets used, the fields are green again, and farmers have a long history of milking on well past the point where the spreadsheet says stop. If we are right, the short curve has less support than the current sentiment suggests. If we are wrong, we will tell you that too, and we'll be busy.

Watch cream this week. Above €5,000 for another stretch and butter sentiment goes with it. Below, and the whole complex gets a lot more honest.

If you have volumes to move, bids to show, or a view that contradicts everything above, we want to hear it. The last one especially — those are the conversations that make our book worth reading.

GFD - Good trading 🤝