Analysis Dairy
Butter prices take a big step upwards
The rising butter price has felt breathless all year and was marked by a lot of volatility in the first half of this year. Just when the market felt calmer during the holiday period, prices took another big step up. The record level from 2022 is suddenly not very far away anymore. The rapidly rising butter price also has an impact on the cheese market.
The butter price quotation from DCA rises this week by €275 to €7,000 per ton. With the remark that this is still a fairly mild reflection of the rapidly rising market, as volumes have already been traded at €7,100 or more. With such large price increases in a week, the record level from 2022 is suddenly not very far away anymore. The market peaked briefly above €7,400 per ton in the spring of 2022.
Stocks on hand
The tight stocks can be seen as the price-driving factor. Both individuals and cooperatives claim to be sold out, making it difficult for trading houses to obtain volumes these days. Probably some stocks are being held back in the rising market, which often happens. The demand from end-users and retailers for butter is also good, somewhat guaranteeing a strong second half of the year. Traditionally, more baking is done in the autumn and winter months. It seems to be only a matter of time before a new record is set. The question is just how quickly this will happen.
The rapidly rising cream prices also have a price-increasing effect on butter. Cream is rising even faster, up by €350 to €8,495 per ton. Historically, the price increases on cream are expected to continue for a while. However, it is noted that in the second half of the year, cream is often overvalued compared to butter, especially around the low point of seasonal milk production in November.
Cheese prices affected
The rising butter market also affects cheese prices. Producers were already relaxed about selling and are now even more hesitant to book volumes for, for example, the fourth quarter. There is still some supply pressure nearby due to the holidays, although delivery lead times are decreasing according to insiders. The discrepancy between the spot market and deliveries further away is therefore quite large. The DCA quotations for Gouda and Edam remain stuck this week, just below the €4,000 per ton mark. According to trading houses, it is 'damn difficult' to secure volumes with a premium of €300 for deliveries in a few months.
Powder not participating
The powder market is not participating in the improved market sentiment and remains persistently weak. The market doesn't need many more words to reveal the key point. Skimmed milk powder continues to move in the range of €2,300 to €2,350, as was the case for large parts of July. Whey powder remains stable at €875. When asked, traders do not really recognize the good European export figures and suspect that a large part of the volume consists of the lower-valued whey permeates that share the same HS code.
