Yesterday was an eventful day in the market, with nearly all the action concentrated on the fat segment. After already trending lower on Tuesday, the downward momentum in market prices picked up significantly. Under the weight of heavy pressure on cream prices, Q2 prices plummeted towards €6,850, a sharp drop from the €7,150-€7,250 range that had held firm in recent weeks. So far, the cheese market remains largely unresponsive, though it seems only a matter of time before the prolonged decline in butter prices starts making its mark on long-term cheese valuations.
As milk volumes increase, surplus milk, SMC, and cream are actively seeking buyers. However, with relatively muted market activity, finding takers—especially for milk and cream—has proven challenging. SMC prices have remained relatively stable at around €2,000, but raw milk is struggling to attract interest above the 50-cent mark, and cream prices have taken a substantial hit. The highest prices continue to be recorded in Western Europe, where trades have ranged between €8,200 and €8,500. Meanwhile, in Eastern Europe, cream prices have tumbled from last week’s €8,800 levels to as low as €8,000 yesterday. Some sources even claim transactions below €8,000, though hard confirmations remain elusive. By late yesterday, additional volumes of cream appeared on the market, yet even the usual large-scale buyers seem to have reached capacity.
The million-euro question is: What will put the brakes on this rapid decline in cream prices? With butter buyers largely covered for the coming months, the current downward trend is likely to persist into next week, with prices potentially dipping below €8,000. Seasoned market participants point to a historical floor forming around four to five weeks before Easter, but at this rate, we could be staring at cream prices near €7,000 sooner rather than later.
Turning to butter, there was no shortage of buying interest yesterday at €7,150 for February-March. However, as Q2 prices started falling to €6,850 ex-works, demand quickly dried up. The lowest February-March prices transacted through us landed at €6,900 for lactic butter, a level where we seem to be finding some degree of support. For Q2, that support appeared at €6,850, even prompting a slight rebound to €6,900. Together with our competing brokers, the trader market showed signs of renewed activity, with over 1,500mt exchanging hands between these levels.
Looking at past cycles, September 2017’s high of €6,950 was followed by a €2,500 drop four months later. The June 2018 peak of €6,000 resulted in a €2,000 market correction within six months. These subdued prices remained until the Covid and Ukraine war crises disrupted the trend. By March 2022, butter hit €7,500, only to decline sharply eight months later, reaching a Q2 2023 low of €4,800—an almost €2,700 drop. Now, after breaching €8,000 in October and November 2024, the pattern appears to be repeating, pointing towards a much softer Q2 2025.
We all know history never repeats itself exactly, but it certainly has a way of rhyming. And once again, we see too many familiar patterns emerging. Each peak is accompanied by arguments from sellers that prices simply cannot return to previous lows due cost price for farmers. But as we have told our readers many times, the cost price of a product, never determines the sales prices of a commodity. But after high prices, prices always find their way back down, they always do—albeit finding a slightly higher floor each time. So, are we bracing for a straight-line descent from here? Absolutely not. There will be moments of strong corrections up on the way down. However, if we take a step back and evaluate the first half of 2025 in June, the overarching trend will likely be unmistakably downward.
With nearly all activity centred on our butter book, we have little to report on the powder market. So, for today, we’ll keep it simple: Just a fat market update. With this level of volatility, even we are unsure where bids and offers will land when the market opens.
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