GDT slip as volumes rise; butter rout narrows EU→US arbitrage

Global Dairy Trade’s Event 388 (16 Sept 2025) closed with the GDT Price Index down 0.8% versus the previous sale, a weighted average winning price near US$4,041/tonne, and 39,093 tonnes transacted — most of it milk-powder volume. Whole milk powder (WMP) and skim milk powder (SMP) were among the weaker categories, while cheddar showed mixed performance. The auction’s modest fall comes against a backdrop of higher offered volumes and softer demand from several regions, reinforcing a cautious tone across international dairy markets.

Detailed price snapshot (selected, Event 388 / contract summaries)

• GDT weighted average price (all products): ~US$4,041/MT.

• Whole Milk Powder (WMP): averaged around US$3,916/MT (down c.1–2% on some contracts).

• Anhydrous Milk Fat (AMF): contract season prices in the range of US$6,700–6,800/MT on several calendar months.

• Butter (CME/spot context): U.S. Grade AA butter spot has fallen below US$2.00/lb (roughly US$4,300–4,400/MT) in recent sessions — materially lower than EU butter references. (Contract-level price lines from the USDA/GDT recaps show small month-to-month softening across milkfat products).

Industry insight
Two forces are evident. First, supply and seller readiness pushed more powder onto the market this event, increasing total tonnes sold and pressuring prices for milk powders and some milkfat lines. Second, buyer demand remained selective — China and parts of Southeast Asia remain important marginal buyers, but their pull has been uneven, leaving northern hemisphere producers vulnerable to price correction. The result is a market where powder prices are consolidating lower and milkfat (butter/AMF) prices are under particular stress because of regional oversupplies and falling spot demand. This dynamic favors processors with flexible selling channels and storage capacity, while pressuring high-cost exporters.

Short-term forecast (1–3 months)

• Expect mild downside pressure to persist for powders (WMP/SMP) unless a renewed round of buying from key importers (notably China and North Africa) returns. Higher available volumes and subdued conversions in parts of the supply chain mean price consolidation rather than sharp recovery is most likely.

• Milkfat outlook is more uncertain: U.S. domestic butter spot weakness suggests near-term downside, but seasonally rising demand into Q4 (holiday baking) could provide intermittent support. Monitor buyer participation levels and major exporters’ shipping offers — if EU and Oceania volumes remain high, further pressure is likely. Overall, the market’s current bias is soft to neutral, with downside risks unless demand picks up.

Why the recent U.S. butter drop makes EU→US exports less viable 

Over the past weeks U.S. butter spot prices (CME / Grade AA) have slipped below US$2.00/lb (~US$4,300/MT), while EU butter reference prices have generally stayed much higher (Vesper’s EU index showed EU butter near €6,700/MT or roughly US$7,700–7,800/MT in late August). That creates a large price spread between EU ex-works and U.S. domestic spot levels. When you add freight, insurance, handling costs — and in many cases import duties or recently discussed tariff actions — the arbitrage for shipping butter from the EU to the U.S. largely disappears. In plain terms: EU suppliers cannot competitively sell into the U.S. unless EU prices fall sharply or the U.S. spot jumps; the recent U.S. butter fall therefore makes EU→US export economics unviable at current levels. This shift reduces one historical outlet for surplus EU butter and increases domestic pressure in Europe to find other markets or build inventories.

Concluding takeaways for traders & exporters

1. Short hedges / caution: Traders should be cautious on long exposure to WMP/SMP and milkfat until buyer participation stabilises.

2. Watch buyer hubs: China, North Africa and Southeast Asia remain crucial demand centres — any signs of restocking there could swing prices.

3. Milkfat mismatch: Keep a close eye on butter spreads (EU vs U.S. vs Oceania) — a persistently wide gap will push EU sellers to pursue alternative buyers or offer deeper discounts, pressuring global milkfat values.

4. Source : Dairynews7x7 Sep 17th 2025 Look at the results here