Does perfect weather mean bad news for dairy?

In this episode of The Milk Check, Ted Jacoby III and the Jacoby team welcome guests from Cefetra Dairy, Henk-Jan Bouwman, Head of Account Management; Martijn Goedhart, Managing Director; and Veljko Perovic, Commodity Market Analyst and Derivatives Trader.

Together, we unpack why the world is swimming in butter and what it means for producers, traders and processors heading into 2026.

You’ll hear:

• Why too much 80% salted has the U.S. sloshing in inventory
• How Europe went from record highs to €2,000-per-ton losses
• When demand might finally catch up with supply

Click play below and listen now to The Milk Check episode 84: Swimming in Butter – Global Insights from Cefetra Group.

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Got questions for The Milk Check team? We’ve got answers. Submit your questions below and we’d be happy to get back to you or answer your question on the podcast.

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Ted Jacoby III: Welcome everybody to The Milk Check, a T.C. Jacoby & Co. podcast.

We have a really exciting episode today. We are going to be discussing the U.S. and European butter markets and how that’s going to affect global butter supply, global butter demand, and obviously price. We are joined today by our good friends from Cefetra Dairy.

We’ve got Martijn, Henk-Jan, and Veljko from Cefetra Dairy. Really looking forward to this discussion.

Joe, we’re gonna start with you. What’s going on with the U.S. butter market? We’ve just dropped in the last two months, what, 60, 70¢? I feel like the bottom just dropped out. What’s been driving this, and how’s this gonna play out going forward?

Joe Maixner: Well, long story short, there’s too much 80% salted sitting in inventories,

both in trader’s hands and in manufacturer’s hands. There was a lot of product built earlier in the year when there was a great carry in the market [00:01:00] and when cream was plentiful.

All of that product is coming back to the market because cream is still plentiful and manufacturers aren’t needing it for micro fixing. Demand has been good, but not great.

Ted Jacoby III: Is it safe to say that even if we’re having good butter demand in the U.S. right now, it doesn’t compare to the increase in supply we’re dealing with?

Joe Maixner: Absolutely. We’re so much higher year over year on fat component and milk production that we just physically can’t consume as much butter as we’re producing.

Ted Jacoby III: Mike Brown, my question for you is this, we’ve come down from $3.50 two years ago, $2.50 earlier this year, now we’re at a $1.75. We’ve talked a lot about on this program how the genetics have dairy cows producing a lot more butterfat than they have in years past, and that’s a trend that has really changed the supply side dynamic for butterfat in the U.S. At a $1.75, does that trend change?

Mike Brown: The genetic trend of course won’t change ’cause it’s permanent .

People have been making decisions to improve fat content of milk for a long, long time. It’s been [00:02:00] emphasized because of the high value of fat. And so it’s already built into not only the current dairy herd, but the animals that will be replacements over the next two or three years.

On the feeding side, that’s another story, but most folks I talk to say a $1.50, $1.70 fat probably isn’t gonna make a lot of change in feeding and management on a dairy farm. You may see some of those higher expensive fat additives that are used to increase fat used a little less heavily, but the trend overall will be there.

Will the rate of gain continue to be as high? I think is a good question, but I don’t think the trend toward gaining fat’s gonna change certainly in the next two, three years.

Ted Jacoby III: So, this is a question for both Mike and Gus. One of the rumors I’ve heard is that there have been some raw milk buyers out there who have been talking about putting caps on butter, fat percentage in milk, or at least what they’ll pay for.

If that does happen, is that going to affect the increases in butterfat percentages in the milk?

Gus Jacoby: I haven’t seen anything but your cheese make yield formula pay prices have some sort of discount for fat [00:03:00] at those higher levels. That’s the only thing that I’ve really noticed in the industry that’s in some way penalizing that increased fat in milk production. Other than that, I’m not aware of anybody who’s discounting fat in any other ways.

Mike Brown: What I’ve seen is consistent with what Gus has seen so far, but there’s lots of things going on in the background.

Federal Order fat is priced off the Grade A butter market, and that price is what it is. Most cheese plants can’t begin to recover that value of fat, particularly if they’re in the spot market with any extra cream or certainly with whey cream. So, they’ve been losing money.

I particularly have seen out West, where the added value for the extra fat has been decreased. There’s plants looking at: should we be pricing it off what our whey cream is worth rather than the butter market? ’cause that’s more what the value really is. The other thing you’re seeing, I think, is even within formulas, should we be deflecting from fat a bit and putting more weight on protein because that’s what we really need to make the cheese. Not necessarily lower the price, but try to send some signal to producers to focus more on protein. ’cause the focus has certainly been [00:04:00] on fat with the high-fat markets.

Most of your cheese plants cannot recover that value, particularly when you get fat that’s more than 130%, 140% the price of cheese. When butter gets that high, it’s a real money loser .

Ted Jacoby III: Joe, one last question you before we bring our friends from Cefetra into the conversation.

 Milk production is up, percentage of butterfat in the milk is up. Looks like we’re gonna have even more butterfat next year than the excessive amount we had this year. What do you anticipate from this butter market over the next 3, 6, 9 months? Are we at the bottom now?

Can we go lower?

Joe Maixner: We probably need to go lower before we stabilize and rebound. I personally don’t think that we see a two in front of the butter price before second half of twenty six.

Ted Jacoby III: that’s an answer I can live with. I think dairy farmers can live with it probably at this point, too.

They’d love to see a 2 in front of the butter market. Having said that, it’s safe to say we’re swimming in butter right now. We’re swimming in butterfat on this side of the pond. Let’s switch to the other side of the pond. We’re seeing record-high butter prices as recently as nine months ago.

[00:05:00] What’s happened since what’s going on right now in Europe when it comes to butter?

Martijn Goedhart: I think what’s happened here is that we were underwhelmed by the output of milk in general in the first half of the year, driven by the aftermath of some diseases.

That pushed prices up to record high levels, especially on the fat side. At some point in time, we saw the spread between EU and U.S. butter widening. That also made us buy some U.S. butter for import into Europe. And that coincided with production going up, driven by good margins and cheese hampering a bit.

That basically gave us our perfect storm. In the last three months, we lost about €2,000 of value per ton on the butter, which is huge. And this is still lingering on because just like in the U.S., we almost call it like a second peak in terms of output because some cows started calving later due to the blue tongue aftermath. So, we definitely have more milk than in a normal season. This caught us a bit by surprise. That also means that now the liquids are trading below the commodity equivalent, which is also unusual for the time [00:06:00] of year.

I feel like we’re in a perfect supply storm at the moment because it doesn’t matter which region you look at, everything is looking absolutely perfect, and not even only from the milk side, but also from the bulk commodity side and vegetable commodities.

That also doesn’t help the sentiment, makes buyers wait, makes suppliers look for buyers because they also don’t want to store it. Supply pressure is still here. We stabilized a bit. But that’s what happened, basically.

Ted Jacoby III: So, if I’m hearing you correctly, in Europe right now, we’re getting perfect weather. Grain feed supplies are really good, therefore, we’re producing more milk. By the way, the same thing’s happening here in the U.S., and I’m pretty sure New Zealand’s in a pretty similar boat. They’re starting up their season and it’s going pretty smoothly so far.

 We’re gonna have a lot of milk this year. A lot of milk solids, a lot of butterfat. That also means we’re gonna have a lot of grain, so we’re gonna be able to feed all the cows, all they need to be fed.

Ted Jacoby III: It just feels like we’re just going into that classic situation we go in every five or six years where we’re just gonna have a lot of everything for the foreseeable future.

Josh White: Can I ask a question though, on the European [00:07:00] side? It seems pretty clear that supply has outperformed expectations in terms of butterfat.

Like I think every one of us agree with that statement. Different reasons out of the U.S. than out of Europe. It seems, the U.S. is structurally, genetically producing more. Europe got tight, did not expect ample supply growth in 2025 and is now being surprised with outperforming milk production expectations. From that standpoint, this is a excess supply driven issue. How much of the radical price change in Europe is also a slowdown in consumer demand because of how high the price got or is that really not an issue?

Henk-Jan Bouwman : The demand is, I would say, not sufficient enough to absorb all the supply. And that’s internal European market. What we also see, in a little bit of a wider lens from a demand perspective, is that a lot of the export clients we used to have for butter, as European butter-producing countries, have switched to alternatives.

You don’t have enough demand within Europe. And additionally, your [00:08:00] export business has dried up significantly because people have looked at alternatives when the prices were at record highs

Josh White: Has the European per capita consumption of butterfat changed much in the past year or so? Historically, that’s very consistent.

Martijn Goedhart: Yeah.

Josh White: Has that changed much?

Martijn Goedhart: It’s stable, Josh. It’s stable, but it is elastic. Across the board, you see prices have eased: for cocoa, for milk, for all the ingredients.

But the shelf prices still need to react. So, how are these food processors gonna go about that? Because they’ve been losing, because they’ve been absorbing those high prices in their books. Are they now gonna keep the shelf prices high and get a bit of that loss back? Or are they gonna adjust it immediately and spark demand? With the butter market, the biggest market in Europe is Germany, it’s quite an elastic market. If people see package prices below two euros, they’re gonna stock up. But the question is what will retail do now?

 Retail recently negotiated at much lower prices. At the market today, like €5,500 [per metric ton]. Will we see that on the shelves immediately or will we see it as volume promotions or something like that? That’s [00:09:00] gonna be the answer to the question, “How long will this take?”

Martijn Goedhart: That’s my opinion.

Josh White: Right now we’re in an oversupply situation and we’re feeling the price pressure. European demand is elastic, but relatively stable. And these price reductions over time will result in a return to normal consumption rates.

Right? So, we’re not seeing any decline there. The U.S. market has matured quite a bit in its butterfat consumption. Overall, butterfat consumption through all products is still increasing year-over-year in the U.S., but maybe it’s slowed it’s sloped down a little bit, but it’s still increasing.

What I’m worried might be covered up in the glut of supply of fat that we’re dealing with is the fact that the rest of the world now seems to be increasing its per capita consumption fat. And right now we are overwhelming the rest of the world with the excess out of Europe, the U.S. and that’s forcing New Zealand to compete, of course. Are you seeing that in the global markets that you’re selling to Henk-Jan?

Henk-Jan Bouwman : Yes, but

it’s not only capped to U.S., Europe, and New Zealand per se. We’re also seeing [00:10:00] fat coming out of originations that were, I would say, a little bit less known, where a lot of effort has gone into approving those origins, using them in recipes, and that has been found quite successful. And because of that, it dilutes demand away from the more traditional butterfat-producing regions.

Joe Maixner: Yeah. The emerging markets is definitely taking market share away from the big three regions, especially in the further processing type manufacturing where the product’s being made into another finished good, and it doesn’t need to have a specific color or visual appearance.

Ted Jacoby III: Joe, let’s expand on that really quick. Europe’s butter being 82% and also having a more yellowish, more flavor in the butter, let’s say, tends to command a premium in the marketplace. So, the U.S., as we’re switching from a fat deficit to a fat surplus dairy industry, is not competing really against Europe. We’re competing against New Zealand and even some of the developing markets [00:11:00] like India who are exporting butterfat. Is that what we’re saying?

Joe Maixner: Well, even New Zealand has a much darker colored product. So, even New Zealand and Europe can be used interchangeably in a customer facing product.

We’re really competing with emerging markets like India, China, and others that are primarily grain fed and produce that whiter-colored product.

Henk-Jan Bouwman : To put a little bit more flavor to that discussion, we do see in our export markets that there are clients who prefer the color profile out of U.S., India, even China, over the more traditional yellowish color of butter. It really depends in what sort of end application the fat is being used. As much as we sometimes think that the pure white U.S. butter in comparison to yellowish New Zealand butter there’s a value difference. It could even flip the other way as well, where a more whiteish butter is preferred over yellowish.

Martijn Goedhart: Yeah, we could break that down. I think what you’re saying, Ted, is you know, there are a few segments that butter [00:12:00] is sold to, right?

So, the first one is bakery confectionary. In that application, it doesn’t matter because you need the fat and you turn it into something totally different. Maybe there’s a little bit with melting points, but that’s not huge. Then you have your direct consumption markets, and that’s consumer preference. They consume the butter exactly as they see it. And that’s typically a yellow butter market or yellowish. And then, you have your processed cheese producers, who prefer the white one because your spreadable cheese is nice and white if you have U.S. butter or white butter. We are competing in some sectors and in some we aren’t. Chinese butter is also very white, so there’s always someone to compete to, but you’re not competing with everyone at the same time.

Veljko Perović : In general, the demand picture remains quite supportive. I think if we look at worldwide trade of AMF butter, but also bulk cream, we see that we made actually record high trade in the last 12 months on some pretty high prices from New Zealand and from Europe, but also from U.S. last year. The demand is there, and I think there’s gonna be people coming in to take it.

In Europe, specifically, a lot of elasticity comes [00:13:00] from us being able to export and import. I agree with Martin there that our domestic demand was actually solid even when prices were higher. Elastic to a degree. But we could slash all the exports and leave them to New Zealand, and at the same time, we could import a bit from New Zealand and U.S. to help us solve the tightness. The European producers are now gonna turn to export market once again to try to alleviate the pressure and the export markets are gonna be a way for producers — whether in Europe or U.S. — to be able to ship some volumes when the S&Ds get pretty bearish, like right now.

Josh White: With all four plus regions bearish butterfat, what does that do to the product mix out of New Zealand? Does that at all impact their decision making between skim and butterfat versus whole milk powder, particularly as they go into their peak season? Are we expecting any type of shift there as a result of the deterioration of the butterfat price?

Henk-Jan Bouwman : Anecdotally, Josh, what I’ve heard is that it might cause a demand shift, first of all. It might cause certain producers of end product, especially in my region in the Middle East to [00:14:00] reconsider their import model. Whereas, over the last year or so, they have worked on a combination of skim milk powder and AMF and they might reconsider that and start using whole milk powder.

There I definitely expect a bit of a shift in production, a bit of a shift in pricing and those kind of things, out of New Zealand.

Ted Jacoby III: Has the butter market, and this is a loaded question because the graph I’m talking about looks a lot different if you’re sitting in the U.S. than if you’re sitting in Europe, but has the butter price dropped enough where we’re gonna spur a lot of really healthy additional demand for butterfat, globally?

Martijn Goedhart: No, Ted, I don’t think so.

Because the global growth in consumption is not very much a price issue. With high prices in China, bakery was still booming, so people are still gonna consume those croissants. The margins are gonna be better for the bakery shops, but the consumers still want it. I would reckon that the home markets of butter, so where the butter is coming from and is consumed Europe, U.S., they’re more or elastic than the upcoming markets.

Ted Jacoby III: Interesting.

Josh White: What about other products capturing [00:15:00] market share away from other fats?

If we’re talking about bulk commodities being weak, is it safe to say that other fats have had an equal decline in prices, relative to the fat content, as butter has or is butter becoming relatively cheaper than other sources of fat?

Martijn Goedhart: I would reckon the contrary, right? I think all the vegetable fats have also made a step up over the last few years.

Veljko Perović : They did make a step up, although now we are also seeing steps down. I think the demand picture in global egg market is really bearish at the moment. So, I think it’s weighing on everything. I think also depends really on the region because we are talking about quite different milk fat prices right now in Europe and in the U.S.

But in general, I think price competitiveness of dairy looks quite okay if we compare it to some alternatives, such as the protein, that will be meat. I think dairy stays a competitive source for both milk fat protein on a global level.

 More than that, we are seeing the bakery really booming in Asia, and I think it’s a trend to stay in the coming years. The aggregate demand is just gonna grow, and there’s gonna [00:16:00] be plenty for everyone to grow their sales.

Josh White: In the coming months in Europe is the relationship between the butter price and the cheese price going to dictate where the milk is processed?

We highlighted earlier that one issue in the U.S. is the Class III facilities that are bringing in milk right now are having a difficult time standardizing to the cheese, resulting in excess fat that they’re forced to move into the market. And that is having an impact on our fat market domestically in the U.S. Is there similar issues within Europe, and will it be influential over the coming months on utilization ?

Martijn Goedhart: The thing in Europe in general is that no one I think really budgeted for this second peak or whatever you would call it, or plateau. Whereas before you would see that surplus milk would be redirected to butter and skimmed, we have significantly ramped up the cheese capacity within Europe.

If you have a new factory, and you have milk, you’re gonna redirect it to the new factory. But we now reach the point that the cheese is almost already [00:17:00] too old when it’s delivered. There’s definitely some stock building up. We’re at the limits of this cheese market and what the market can take. More product is redirected again to skim and butter. At the same time, if you have a drying tower or a butter churn, you’re not totally filled up. So, it’s also an opportunity for powder dryers to pick up some cheap concentrate. Supply is still overwhelming because we’re trading below the commodity equivalent.

 There is more supply of liquids than there is demand for the commodity that’s produced out of it.

Josh White: If we’re looking at too much butterfat, coming from good quality, milk growth across the entire world, we think demand for butterfat is good and growing, just not growing quickly enough to consume the amount of fat that we have.

You have a couple options. Slow down your growth rate and wait for demand to catch up. Experience some type of disruptor to supply. That could always happen. Last year, disease was a big topic. Weather can always be a topic. Or you bring a price down to the point where you actually slow milk production.

From both the U.S. and the European side, current spot [00:18:00] prices — which are lower than current pay prices to producers, right? The pay prices lag, I think in both continents — current spot prices. Are producers profitable at the current spot price or are we starting to flirt with decreased margins or something that could either slow or reduce our milk production quantities as we look ahead into 26?

Veljko Perović : If we are talking about the price of raw milk as a commodity,

it’s absolutely below the price where farmers are making money. Now if you are talking about the payout prices, which as you say, Josh are lagging behind, then there’s still a good margin for the farmers. I think in Europe, it’s now the matter of how long are the producers willing to take a hit?

Because with the current S&P and butter prices they are taking a hit, and at some point they need to transfer this to the farmers. Now a key difference in the U.S. and EU dairy at the moment is:

U.S. is built to grow. Well, Europe is not. In Europe, most of the bearishness does not come from us, like structurally oversupplying the market, but from [00:19:00] a short term surge in milk, which we are seeing, but we are still facing with structural problems that our herds are decreasing and we are not built to grow.

I think, in Europe, there is a likelihood that we will solve the S&D issue, the oversupply which we have, sooner than the U.S. We will have to see more milk price cuts for that to happen. But when it happens with the herds, which are still losing I think we might see an abrupt change from adding a lot of milk to suddenly losing it.

Ted Jacoby III: Do you have any idea how long it’ll take to get there?

Veljko Perović : I don’t think we are there yet. I’m not calling it the bottom yet. Producers also earned quite some good money last year and in the first half of this year, I think they can take a bit more hits.

We need to see the milk price drop. We saw 2.75 cents decrease for FrieslandCampina. I think we need to see two or even three more cuts like that before we seriously damage farm profitability. And at that moment, farmer might react.

Martijn Goedhart: Then I guess, Veljko, from a seasonal perspective, you’re past the point that you’re gonna [00:20:00] adjust your herds for the flush, right?

If it takes another two to three months, you have your cows set up, so then you’re gonna work your way through the flush before you do anything drastic, because anything else and that would be a waste of capital.

Ted Jacoby III: It sounds like both in Europe and in the U.S., by the time you start getting an appropriate reaction by the dairy producers, you’re gonna be past the spring, and that means we’re just gonna have a lot of milk for most of 2026 and it won’t be till 2027 where we see an adjustment.

Veljko Perović : That’s true. The farmer needs to make the decision how many cows to keep for the new season. I also think that when the incentive is gone to squeeze more out of the cow, they will stop squeezing because the amount that they’re squeezing right now in Europe is incredible.

Martijn Goedhart: That’s a good point. So there’s also your delta on components, right? With profitability diminishing, you’re probably not gonna do your best job there. Although, people are hedging their inputs now, and that’s also looking very bright, so that’s also already set up for profit.

Josh White: Seems to me like we’re in a game of chicken: who can wait longer between the [00:21:00] U.S. and Europe. My question is, the European model still has quite a bit smaller dairies than the U.S. model, as I understand it. And I also have the belief just in conversations with different people that, whereas Mike mentioned earlier that the U.S. will not likely turn down the way we feed and the growth that we’re seeing in our butterfat, that Europe is a little bit more sensitive to that, and if the butter price is lower, changes to the diet for the dairy cow can be made relatively quickly. Is that a true statement?

Martijn Goedhart: The main difference is that in the U.S. it’s much more common to hedge your input and your output.

If you would do that today for the coming season, you’re set up well. Whereas like you said, because we have a lot of smaller farmers, the average size of a farm is much smaller, people leave it floating, and if something changes, you’ll see more acute or abrupt reactions compared to when you’re hedged further out.

Yeah, maybe the milk prices here move relatively [00:22:00] slower than in the U.S. but the margins might move quicker because they’re still exposed. It’s not managed.

 On the U.S. side with current spot prices, is the dairymen profitable?

Mike Brown: It’s how quick the response is.

I’m here at World Dairy Expo, everyone says, our revenue from the beef stream is $3 higher than it was four years ago. And that’s what’s saving everybody’s, necks at the moment. Lots of talk where your big commercial herds, if they can get a, delivered milk price that is north of

$16, $17, they’re doing great. They haven’t felt them yet in their milk checks ’cause a lot of this price declines the last couple months and it takes a while to get through the system.

But, I think for the most part, at current spot markets, yeah, I think they are still profitable, particularly on the Class III side. ’cause the whey value is so high. That’s putting a big kick on that Class III price. So, I would say they are, but we get butter below a buck 50, and if we get cheese hovering down $1.50, $1.60, then maybe it’s a little different, but I don’t see a massive exit. The other thing is we’ve had a lot of growth in [00:23:00] capacity in plants we have producers that are committed to fill those plants, and those projects are going to continue. Will we see some decrease on the margin? Possibly. In the dairy genetics business, semen sales in beef remains the strongest it’s ever been, and and it’s all for dairy cows.

They have herds anywhere from 20% to 70% using beef bulls on their cows, depending what the replacement needs are. If they’re growing, as you can imagine, they’re slower. And these are the big, well managed herds. So I don’t really think there’ll be an immediate response in our profitability.

I think they’re still okay. But we don’t know what the floor is. If we all know what the floor is, we’d be very wealthy but we don’t. So I think it’s a little hard to say Josh, but I think right now, yeah, they’re cash flowing fine.

Smaller ones are starting to struggle. They haven’t been sophisticated in their beef marketing and planning perhaps as the large guys have been. But in general, the bulk of our milk supply, I think is still pretty well positioned to do. Okay. Big exception is perhaps the Pacific Northwest.

Other than [00:24:00] that, I think people are doing okay.

Ted Jacoby III: Are the dairy farmers in Europe breeding to beef? And is the beef price as high? Is that dynamic going on in Europe like it is in the U.S.?

Veljko Perović : Absolutely, yes . We are also seeing in Europe record high beef prices. It is adding to the profitability of the dairy farmers because they can get more from the meat.

It’s a nice extra stream flow to keep the cash flow going.

Ted Jacoby III: I just can’t help but feel like we’ve got a dynamic right now where we’ve gotta go to a pretty low price point to cause a supply side reaction, and it might be lower than anybody’s willing to come to terms with at the moment.

Joe Maixner: Let’s keep in mind, on almost every product, too, we’ve increased or are increasing production capacity in the United States at a time where the markets are falling rapidly

Ted Jacoby III: Yeah. And it sounds like the same thing’s going on in Europe, too. They just added cheese capacity there as well. Correct?

Henk-Jan Bouwman : Correct.

But that’s mostly driven by the desire of producing high protein.

Martijn Goedhart: Yes, to some extent because that makes you win when it [00:25:00] comes to streams return. But you’re only gonna build cheese plant if you know you have the demand for it. But yeah, if everyone’s doing the same thing, then you might overshoot a bit. I think that’s what we’re seeing right now.

 If you have a new origin, you also need to find customers to get it approved. Maybe one thing to add if you look at global commodities and here, we look a lot at weather and harvest, it’s looking absolutely perfect with all lights on green. The more macro commodity outlook also sometimes influences our little dairy world a bit, right?

Josh White: Going back to demand, the confectionary industry was awful last year, right?

Driven by the issues with chocolate, yet we’re still talking about consumption of fat being pretty good. We’ve just responded with great production. Where could we be missing pockets of demand growth on the fat side? Like confectionary, how’s that doing? Is that an opportunity to consume more dairy fat as we go into 2026 with lower prices?

 Where can we capture fat business as a substitute from non-dairy sources. Is there anything we’re missing in terms of demand growth [00:26:00] for butterfat at lower prices?

Joe Maixner: In confectionary, I think that the demand shrinks for next year. I think that overestimated for this year’s and they’re gonna be carrying supply into next year.

And so I think that the demand is gonna be less. As far as other areas for growth? Emerging markets, we have to remain competitive in the U.S. specifically on exports. The longer we remain low priced, the more new markets we’re going to be able to penetrate.

That’s going to be our real opportunity for growth into next year.

Mike Brown: I’d agree with Joe. Same thing here with fat. Fat’s been a pretty low margin item in the butter aisle because they try to keep the price as competitive as they can. If we’re gonna have a dollar 50 butter, how much of that will be transferred to the consumer because then you still maybe have a chance to garner more of the margarine market away. You can get butter prices in that $2 range, And by the time you buy bulk butter and you package it and go get in a grocery store your net cost is gonna be, from my [00:27:00] experience, probably 30 cents to 35 cents over the commodity market.

It’s not that much really. But are they gonna be willing to do that when they finally trying to recover some margin that they haven’t had? We’ll have aggressive promotions for the holidays, that’s for sure. But how much new business that picks up versus stealing it from each other’s label is a whole other question.

Joe Maixner: Worldwide, we are entering the largest demand period for butterfat, right? The next three months is the largest demand period for butterfat, and then you’ve got an early Ramadan coming up at the beginning of next year, and those inquiries and orders have already started as well.

My fear is that we front load both on the retail side and all of the product for this demand period. And all those orders come in and then we end up in a global fat surplus once we get out of the holidays and prices just collapse everywhere.

Mike Brown: From my experience, supermarkets’ demand for butter is double fourth quarter than it is any other quarter.

I mean, it’s huge. A lot of that butter is pre-bought because there isn’t capacity to [00:28:00] make it in fourth quarter. So even though the cash market may be significantly lower, the cost of goods isn’t necessarily that low. It takes time for that to work down into retail.

So maybe we’re gonna have great butter sales in February, ’cause by then their inventory will be at a lower cost. But right now they’re blending the current market with some, pretty high price butter.

Martijn Goedhart: That’s an interesting point, right? You have the retail lag. When the raw material prices reach the shelves, it’s like there’s a lag of three to six months, something like that. We’re also discussing like it’ll take at least three to six months for farmers to feel anything in terms of output and then probably another three months before they really react. Those two points where the goods have become cheap enough that customers are gonna buy more, but at the same time the farmers are gonna slow down because they’re not making money anymore. Those two points, they might be very nicely overlapping at some points, and that’ll turn everything around, I think.

In my opinion, you’re talking post summer 26.

Joe Maixner: Yeah, minimum second half of 26 before we really start to see that.

Ted Jacoby III: Guys, is there any hidden demand in fat filled [00:29:00] powders? If the butter price gets low enough, could you see some of that fat filled powder business to Africa switch over?

Martijn Goedhart: No, no, it’s direct to consumer product, so people have gotten used to specific taste and profile of fat filled.

Ted Jacoby III: I understand. This has been a fantastic conversation.

Martijn, Henk-Jan, Veljko, thank you so much for joining us today.