Yesterday, the market continued its bullish trajectory, driven primarily by surging spot prices for liquid products.
With raw milk prices averaging €0.65, SMC prices reaching €2,550, and cream prices breaking records at €10,000 to €10,250, it’s evident that processors are fiercely competing for raw materials.
This has left minimal supply available for commodity production. Current offers for butter exceed €8,000, SMP prices are above €2,400, and Gouda is now being offered between €4,900 and €5,000 for Q4. These escalating prices are generating significant emotional responses among buyers.
As seen in previous market transitions (from bearish to bullish and vice versa), buyers are experiencing the five emotional stages of grief.
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We all know that trading is deeply intertwined with emotions. A successful sale gives a sales manager a dopamine boost, instilling greater confidence for future trades.
Similarly, a trader who seizes the right opportunity at the right moment, or a purchasing manager who secures a good parcel for their company, experiences this same euphoria.
However, the emotional toll of trading can be severe, especially when poor decisions are made. While some mistakes can be quickly rectified, others have far-reaching consequences that take more than a quick fix to heal.
Conversations with our purchasing partners reveal they are currently navigating the early stages of grief.
Denial: “This market is overheating!”
The first stage, denial, has been prevalent since May. As prices began to rise before Eucolait, many buyers believed these higher prices were unsustainable. While there was a slight correction post-Eucolait, prices have not significantly declined.
Typically, we receive direct feedback when we release our reports so we can monitor the sentiment in the market more closely. But this summer, that feedback was notably absent due to our break.
However, since our return last Monday, it’s clear that denial has remained widespread among our partners. Terms of “overheating”, “sentiment-driven” and “it’s only a traders game” confirmed that not much has changed in our six weeks’ absence.
Anger: “These prices are criminal!”
The second stage, anger, is now apparent. We hear it in the responses to our updates, during phone calls, and from other partners.
Buyers are increasingly frustrated with their sales counterparts, feeling that the high prices are unreasonable, almost akin to theft. The rapid changes in offers, often valid for just a few hours, and the frequent withdrawal of offers are significant sources of irritation.
Traders are being blamed for driving up the market, producers of withholding products, and brokers, including us, are accused of creating volatility. We understand the frustration and the immense pressure this market puts on those responsible. But as said, we feel this market is clearly fundamentally driven.
Bargaining: “Can we get last week’s offers back?”
We are beginning to see the first signs of bargaining. Some partners are revisiting earlier offers, and similar actions are being observed across the market.
Buyers emphasize the importance of partnerships during these extreme times and attempt to convince sellers to ease their burden. Although some traders are offering slightly below current market levels, the majority have little choice but to adhere to the higher offers.
Depression and Acceptance: “Accepting short-term pain.”
The final stages of grief, depression, and acceptance, are also emerging. We see the strain in our partners’ faces, gradually shifting to acceptance, particularly as most of them begin to confirm prices for September and October. However, for Q4 and Q1, denial still lingers.
Only the traders seem to realize that the fundamental data only leaves one possible outcome for dairy commodity prices. Prices are now rising rapidly due to the strong demand for immediate delivery. If acceptance extends to Q4 and Q1, we anticipate even further price increases.
Butter: Breaking € 8000, Looking for a ceiling!
Yesterday we also broke the magical number and brokered some business at € 8000,- and above for butter. Cream prices are now trading well over € 10.000,- op to prices of € 10.250 delivered.
Speaking to producers it seems fresh butter will only be produced at prices of € 8500 and higher, otherwise the cream is sold to buyers who create soothing else than butter. The longer the market rejects the prices of € 8500 and higher, the longer it takes for butter production to meet the demand.
We hear that German retail prices have been closed relatively low at € 7850,- for September, suggesting that sellers have not been anticipating this week’s additional move up. If retailers will see that October prices might be even higher, we expect strong demand from retail to the repackers and producers who supply small packaging.
We expect to start the day with:
We have Buyers for:
- 4 loads of Irish Lactic Butter for September at €7750 FCA Ireland
- 9 loads of NL/DE/BE fresh for Q4 at €7950
- 4 loads of Fresh Friesland Campina Lactic for October at €7,800
- 2 loads of Fresh Solarec Butter for September at €7,800
- 6 loads of NL/DE/BE fresh/frozen for Q1 2025 at € 7400
We have Sellers for:
- 4 loads of NL/DE/BE fresh/frozen for September at €8000
- 6 loads of NL/DE/BE fresh/frozen for Q4 at €8025
- 4 loads of Irish Lactic for September at €7,900 FCA Ireland
Cheese: No More Offers
Cheese buyers are chasing the offers as supply is getting tighter and tighter. Speaking to producers we see offers for mozzarella and gouda need to be at € 4800 fca or even higher, while our buyer has a hard time paying almost € 500,- more than a week ago.
We received an offer for Mozzarella at € 4480 and within minutes that offer was taken. It is a sign of how eager buyers are to buy at relatively low levels. At the moment we are starting with offers for
- 2 trucks of Gouda for September at €4750 FCA NL/DE
- 3 trucks of Mozzarella for Q4 at €4,850 FCA NL/DE/BE
- 2 trucks of Emmantal for September at € 5300 FCA NL/DE
Powder: Offers Up, Buyers start Move
On the powder front, we are observing some movement. Buyers are gradually starting to bid higher, but the primary focus remains on non-standardized material.
Meanwhile, sellers are showing some reluctance to make firm offers. Following a bullish GDT Pulse, it’s anticipated that the global market is gaining some traction. CME prices for NFDM are trending upward, indicating a slow rise in international prices.
In the EU, SMC prices are also on the rise. Just a week ago, prices were trading around €2,250, but they have now climbed to between €2,500 and €2,600 delivered.
This upward trend reflects the tight spot supply. Given these price levels, we expect SMP production to remain low. EU demand is steady, while export demand is growing.
However, the current strength of the Euro against the dollar poses challenges for exports. Still, if prices increase further, the EU is likely to secure some sales in the international market.
We start the day with:
- an offer for 12 trucks D40 for Q4 + Q1 at € 1075 FCA Spain
- an offer for 150mt of Solarec SMP for export for Q4 at € 2700
- an offer for 200mt SMP non-standardized for September at € 2550 DAP NL
- an offer for 200mt SMP codex NL/DE/BE FCA for September € 2490
We have buyers for
- 200mt non-standardized SMP DAP NL € 2500
- 400mt non-standardized SMP UK origin DAP NL € 2475
- 300mt solarec fresh for Q4 at € 2550
