Dairy Markets Face Volatility as Bearish Sentiment Emerges
Source: dairynews.today
Dairy markets have seen sharp swings in the first three trading days of the week, with tight spot supply keeping nearby contract prices elevated. However, early signs of weakness are emerging as more offers enter the market, though mismatches persist between supply and demand.
The Global Dairy Trade (GDT) auction provided little direction, finishing flat at 0% fr om the previous event. While underlying bullish and bearish factors remain, the broader market appears to be in a holding pattern. Nonetheless, sentiment around EU dairy prices is turning bearish. While physical markets remain constrained, futures markets are under pressure, with butter prices falling nearly €250 this week alone.
Market participants are questioning the shift in sentiment. While no clear trigger has emerged, several factors are contributing to a more bearish outlook. High milk prices are expected to boost production, while fat and protein content are rising across key producing regions. Ireland is on track for a strong season, and additional supply from the U.S., New Zealand, and Ukraine is flowing into the EU market. Meanwhile, export competition from the U.S. is weighing on demand. Recession fears and potential demand destruction further bolster the case for weaker prices.
Despite these pressures, the market has defied similar bearish signals in recent months, with butter and cheese prices rising nearly 10% on concerns over bluetongue, low starting stocks, and sustained demand. GDT auctions continue to reflect strong interest in these products. Any production setbacks from drought or rising energy costs could swiftly reverse bearish sentiment.
Uncertainty has driven buyers into the market in recent weeks, while sellers have remained cautious. Some forward sales at lower levels suggest expectations of a shift in market dynamics, with buyers potentially overcommitting and sellers underestimating demand. Those betting on weaker prices face risks, but potential rewards remain significant.
GDT Results Hold Steady
Tuesday’s GDT auction met expectations. EU butter traded just below €7,550, though buyers may hesitate at that level. Unexpected gains in NZ butter offset another decline in anhydrous milk fat (AMF). Market participants report some EU buyers considering AMF imports despite duties, potentially explaining a more bearish stance on fat prices.
Liquids Market Under Pressure
Favorable weather is driving higher milk volumes, while demand remains sluggish. Increased availability of raw milk, skimmed milk concentrate (SMC), and cream is weighing on prices. Cream fell below €8,800 after trading at €9,150 last week, with some purchases reported as low as €8,600 FCA Eastern EU. SMC prices are also under pressure, trading below €2,000 FCA. Some expect a short-term recovery in cream prices ahead of Easter demand.
Butter Futures Slide
Butter prices fell sharply, with Q4 futures down to €7,250 and Q3 at €7,275. Q2 prices remain firmer, reflecting ongoing supply constraints, but expectations are shifting toward a looser market. Ukrainian imports are playing a role, widening spreads between Polish (€7,300) and Ukrainian (€6,700 DAP NL) butter.
Recent trades include:
Irish butter at €7,320 for May-July
NL/DE/BE butter at €7,325 for May-July
For Q3 and Q4, bids have thinned, with buyers focusing on April offers.
Cheese: Increased Selling Interest
While cheese prices remain firm, more sellers are engaging at current levels. Lower U.S. prices and falling fat/protein costs may lim it upside potential. However, fresh stocks remain tight, and producers are not under immediate pressure to sell.
Current buyer interest includes:
Mozzarella at €4,200 for April
Gouda at €4,350 for prompt delivery
Powder Markets Decline
Weak GDT results and sluggish EU demand are weighing on powder markets. Even bearish traders were caught off guard by the latest skim milk powder (SMP) results. With a soft U.S. market and falling SMC prices, further declines may be likely. The cash-and-carry trade remains active, with Q2 purchases around €2,300 and Q3 offers above €2,500. However, if futures weaken, physical markets are expected to follow.
Current offers include:
200mt Uelzena SMP MH Prompt at €2,375
150mt Arla SMP MH Prompt at €2,350
300mt SMP MH German Q2 (April-June) at €2,375
90mt SPW Spanish FCA NL at €975
50mt BMP N-Irish at €2,650
Market participants are questioning the shift in sentiment. While no clear trigger has emerged, several factors are contributing to a more bearish outlook. High milk prices are expected to boost production, while fat and protein content are rising across key producing regions. Ireland is on track for a strong season, and additional supply from the U.S., New Zealand, and Ukraine is flowing into the EU market. Meanwhile, export competition from the U.S. is weighing on demand. Recession fears and potential demand destruction further bolster the case for weaker prices.
Despite these pressures, the market has defied similar bearish signals in recent months, with butter and cheese prices rising nearly 10% on concerns over bluetongue, low starting stocks, and sustained demand. GDT auctions continue to reflect strong interest in these products. Any production setbacks from drought or rising energy costs could swiftly reverse bearish sentiment.
Uncertainty has driven buyers into the market in recent weeks, while sellers have remained cautious. Some forward sales at lower levels suggest expectations of a shift in market dynamics, with buyers potentially overcommitting and sellers underestimating demand. Those betting on weaker prices face risks, but potential rewards remain significant.
GDT Results Hold Steady
Tuesday’s GDT auction met expectations. EU butter traded just below €7,550, though buyers may hesitate at that level. Unexpected gains in NZ butter offset another decline in anhydrous milk fat (AMF). Market participants report some EU buyers considering AMF imports despite duties, potentially explaining a more bearish stance on fat prices.
Liquids Market Under Pressure
Favorable weather is driving higher milk volumes, while demand remains sluggish. Increased availability of raw milk, skimmed milk concentrate (SMC), and cream is weighing on prices. Cream fell below €8,800 after trading at €9,150 last week, with some purchases reported as low as €8,600 FCA Eastern EU. SMC prices are also under pressure, trading below €2,000 FCA. Some expect a short-term recovery in cream prices ahead of Easter demand.
Butter Futures Slide
Butter prices fell sharply, with Q4 futures down to €7,250 and Q3 at €7,275. Q2 prices remain firmer, reflecting ongoing supply constraints, but expectations are shifting toward a looser market. Ukrainian imports are playing a role, widening spreads between Polish (€7,300) and Ukrainian (€6,700 DAP NL) butter.
Recent trades include:
Irish butter at €7,320 for May-July
NL/DE/BE butter at €7,325 for May-July
For Q3 and Q4, bids have thinned, with buyers focusing on April offers.
Cheese: Increased Selling Interest
While cheese prices remain firm, more sellers are engaging at current levels. Lower U.S. prices and falling fat/protein costs may lim it upside potential. However, fresh stocks remain tight, and producers are not under immediate pressure to sell.
Current buyer interest includes:
Mozzarella at €4,200 for April
Gouda at €4,350 for prompt delivery
Powder Markets Decline
Weak GDT results and sluggish EU demand are weighing on powder markets. Even bearish traders were caught off guard by the latest skim milk powder (SMP) results. With a soft U.S. market and falling SMC prices, further declines may be likely. The cash-and-carry trade remains active, with Q2 purchases around €2,300 and Q3 offers above €2,500. However, if futures weaken, physical markets are expected to follow.
Current offers include:
200mt Uelzena SMP MH Prompt at €2,375
150mt Arla SMP MH Prompt at €2,350
300mt SMP MH German Q2 (April-June) at €2,375
90mt SPW Spanish FCA NL at €975
50mt BMP N-Irish at €2,650
