Butter
US market is totally disconnected from EU and APAC
Europe
Even though the EU butter price dropped briefly below EUR 7000 around mid-February – when temporary oversupply in Eastern EU forced prices down in other EU countries as well – the butter price in the EU has since then made a U-turn. The reasons for the sudden price appreciation range from a relatively weak milk production outlook to empty warehouses and the approach of the Easter consumption peak level. The market is in a short squeeze and the butter price has appreciated to EUR 7500 ex works. There may come some relief from the improving availability of cream but with the current strong retail demand there is probably not much room for price relaxation in the short term. The price differential with the US has become very large but for parties that do not have the correct quota allocations and licenses most of this differential will be absorbed by costs of getting the butter across the borders.
Americas
US butter market plays its own game
In the January Market Watch we mentioned a counter seasonal start of the year with still a big question mark, but now we are no longer uncertain about this. Cream availability is much looser than it normally is at this time of the year and with food service demand being low, stocks of butter being the second highest level in history and record butter production in the Mid-West the price had to come down. At the current market rate of USD 2.25/lb (4960/t) ex works it is lower than it has been in the past 39 months, which means we have to go all the way back to Dec 2021. The good news is that US butter is by far the most competitive on the export markets, but in order to be successful it needs to be unsalted, which the bulk of US butter is not. Export grade unsalted butter commands a premium of about USD 650/t but even then, it remains very competitive. The domestic futures market still carries a premium for Q3 (currently quoted in the USD 2.60s/lb) because competition for milk fats is expected to pick up with all the cheese plants that are going to come online.
Asia-Pacific
Butter outperforms AMF
Strong demand for butter pulled the GDT price up to around USD 7500. The Middle East absorbed about 50% of the volume on offer, and China and SE Asia followed suit. Demand for AMF stagnated, but SE Asia and the Middle East were the biggest buyers. With a current market price post GDT of USD 7550 for butter and USD 6600 for AMF, both FOB, the price structure remains inverted.
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