Butter
US butter remains very competitive for exports
Europe
Tighter cream supply turns the sentiment around
The EU butter market sentiment changed when it became clear that the heat waves tightened cream availability so strongly that the cream prices jumped by more than 25% to levels of EUR 5000/t and higher in just a fortnight. Obviously butter prices rose as well as at these cream prices it does not make sense to produce fresh butter. At the current level of EUR 4000-4100 ex works for Q4 deals the supply of butter has tightened considerably. However, the buyside is generally well stocked so there is a certain market balance still. US prices have declined a little and this gives the buyside some further comfort. The EU butter price is therefore expected to be largely range bound as we go into Q4.
Americas
US export potential remains strong
The US butter market has not changed much in the past month. The spot prices trended down mildly to USD 1.44/lb (3175/t) ex works and are expected to remain range bound. With cream supply seasonally tightening, many churning plants have planned maintenance breaks. Therefore micro-fixing – i.e. repacking bulk butter for retail sales – is the main source of butter supply at the moment. The demand side is strong, both from the local market and on the export side. With EU prices appreciating, the US have been very successful on the export market and July figures were record high. The current market situation feels like a tug of war between extraordinarily strong production and very good demand, with both sides not showing any weakness which accounts for the range bound price outlook.
Asia-Pacific
Oceania origin remains attractive
The fat market in APAC is weak and the GDT prices have been taking steps down recently. There is a lot of butter supply out of the US and Latam in markets like the Middle East, SEA and Australia. The fact that several players in APAC favor Oceania product provides support for the prices here. AMF is now traded at levels of USD 5950 FOB and butter changes hands at around USD 5100 FOB. With milk supply growing seasonally the fat prices in APAC will have more downward potential in the short term, as most markets seem to be saturated.
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