Butter

August price levels in EU, US and New Zealand are record high

Europe

Butter prices rose to EUR 7200 ex works for nearby delivery dates and further forward they are even EUR 200-300 higher, which is record height in the ten year history of Market Watches (see also the NICE TO KNOW Box below). That this happens at a time when many market participants are on holidays is quite unusual. The main trigger for this steep increase in price is a lack of butter production in combination with low butter stock levels. That milk supply is seasonally decreasing doesn’t help the butter production to increase, and if at the same time the fat content in milk across Europe is also lower than usual, it only adds to the deficit on fat we are currently facing in Europe. There is a big question mark how the record price will affect demand at a time that it has been a little soft for most of the year already. Whether demand erosion will be able to affect prices, though, is questionable, because of the limitations in butter supply. Cream is very expensive as well so no relief is expected on that side. Pricewise it would make sense to import butter out of NZ but because of the long lead times imports will not arrive in time to provide meaningful relief for the end-of-year consumption firmness that usually characterizes the festive season.

Americas

Supply and demand remain balanced at elevated price levels

The US butter market remains stable at high prices. Product is changing hands around a price level of USD 3.10/lb (6835/t) ex works. Cold storage and production reports indicate that production is strong and supplier and trader stocks are also elevated, but all of this is in line with market expectations. Demand going forward is seasonally firm, the global market is tight and most buyers are short covered due to the elevated price levels. Therefore near term downside risk seems mostly absent despite the strong supply fundamentals and a slightly downward futures curve towards the end of the year.

Asia-Pacific

Butter price does not waver with the approach of the season

The butter market in APAC has been quiet in the past few weeks, as buyers tried to stay off the market in anticipation of expected price reductions at the start of the new production season. Chinese demand was remarkably slow. Some SE Asian buyers were looking for Latin American butter but this origin was not really available. New Zealand butter production is being boosted at the expense of AMF and because of this there was some room for a price decrease at the early-August GDT session. Post GDT the market price rose again to USD 6800 CIF Asia, which is record high for this time of the year, see also the NICE TO KNOW Box below.

NICE TO KNOW: For the past several months we have been writing that the US butter prices are at record height for the time of the year. This is now also the case in New Zealand and in the EU, where the August 2024 prices are significantly above the levels quoted two years ago, when they were peaking because of the aftermath of the COVID-19 lockdowns that had left many supply chains virtually depleted. The current reasons are various, ranging from general inflation levels to lower milk volumes, shrinking fat content and stronger competition for milk from cheese manufacturers. The graph below highlights the August prices for the three regions for the past six years.