Analysis Dairy
Sky-high butter prices cannot be sustained
After the butter prices have risen to unprecedented heights in recent months, a correction is now following. Meanwhile, the butter prices in supermarkets continue to rise further.
The turnaround in the market, visible since the last week of September, is mainly a matter of sentiment. As the market declines, buyers withdraw their bids. Sellers, on the other hand, come up with extra supply to prevent a price drop. The correction can be seen as a healthy development in the hectic market situation of the past months, where prices rose to well above €8,000, breaking records from 2022.
Market reversal
The day market for delivery in the fourth quarter is now below €7,500, insiders indicate. This means that the price drop is almost as strong as the recent recovery we saw. The DCA benchmark is not yet at this level, but is heading for a significant correction this week. It is currently difficult to predict where the market bottom will be. The butter market has been unpredictable in recent months.
The butter stocks are still described as tight. In addition, the Christmas demand is imminent and the milk supply in Northwest Europe is almost reaching the seasonal low in November. These factors suggest that butter prices will remain historically high in the coming months, but the market is now leaving behind the record levels.
Aldi raises prices significantly
Meanwhile, the butter prices on the shelves anticipate the increased prices since August. For example, discount retailer Aldi in Germany increased the prices of 250-gram packaging under its own brand Milsani by €0.30 to €2.39 as of October 1. According to German media, this is a record. Other supermarket chains are likely to follow this example, also in other European countries.
Whether this will lead to a decrease in consumer demand is difficult to say in advance. Generally, the demand for (baking) butter is higher in the winter months than in the summer.
