The main market mover of the past two weeks was a heatwave across Europe. Less milk, less cream, and prices responded: EU spot butter gained close to 3% and SMP lifted around 2% off recent lows, helped by short covering from traders caught on the wrong side. The move is real. Whether it holds is another question, and market contacts give the same answer: probably not.
This is a sentiment trade in a low-liquidity summer market, and the underlying picture has not changed. EU butter stocks remain near a five-year high, buyer coverage for 2026 is estimated at 90 to 95%, and EU milk production ran about 2.9% higher in April, with the widely anticipated second-half slowdown being pushed toward Q4 or later. Older butter is already trading at a visible discount to spot A-quality, a gap expected to widen as Q4 approaches.
On the demand side, ONIL completed a tender covering Q4 2026 and the opening months of 2027, taking approximately 30,000 MT of SMP and 5,000 MT of WMP. The next tender is not imminent; Algerian buying has moved further out on the calendar rather than disappeared.
The US and New Zealand offer no relief. CME NFDM closed June at $1.59/lb with futures pointing to the low $1.50s by August, while US butter bounced to $1.65/lb on strong export demand. New Zealand product has ground steadily lower through the off-season, with butter down just over 10% and SMP down more than 13% since the last main GDT event.
The outlook: once cream supply normalizes and cows head into their seasonal decline regardless, the temporary support falls away, and a drift back through July and August is the more probable path. The full analysis covers the stock aging dynamic, the SMP cost floor, and the WMP picture product by product.
