Butter makes for a slippery surface

The spot quotation came through the summer period at a relatively high price level and since its inception (2007) has only had to tolerate the year 2013. At the time, the spot price was approximately €5 higher at more than €49 per 100 kilos.

The demand for milk owes its solid basis and upward potential to a stable butter market, which has had more demand than supply for months. Since February there has been an increase in the price of butter, from €3.900 to €6.850 per tonne. That's a plus of 75%. The fact that such prices are exceptional is visible in the graph below.

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Butter prices in recent years.
Source: Boerenbusiness

High cream prices have a negative effect
Last week it has already become clear that high cream prices deter buyers and put them in the mode of safe trading. This is because the moment when the market could tip over is getting closer. And every trader seems to fear such moments.

This week it became even clearer that trade is nervous due to the high cream prices. While the milk supply is normally limited, which causes a rising trend in cream prices, the milk supply is now greater than last year. In addition, cream prices are at a high price level.

Although no one wants to say out loud that the cream ladder is about to fall, people do take that into account. What can save the market is a seasonal drop in supply. However, in combination with sustained or increasing demand. Since the latter cannot be ruled out, everyone keeps their cards close to their chest.

Good demand for butter
The good demand for butter comes from, among other things, the baking world. In addition, butter seems to have become more attractive as a result of the hype from America. Because of the high cream prices, every dairy factory also wants to keep the fat for itself as much as possible. It is striking that butter consumption in Germany has fallen by 6 tons in the past 20.000 months.

China plays a leading role in cheese sales by placing more demand for cheese on the market. According to the latest insights, Chinese cheese demand has increased by 10% compared to last year.

What does the spot market record?
The raw milk trade is a mixed bag of prices this week. The traded volumes are limited and due to disruptions or maintenance in factories, trading occasionally occurred at lower levels. Yet the undertone is good, which is why the spot price for raw milk has managed to maintain this week at €44,50 per 100 kilos.

Moreover, the supply of milk is not large. The prices of cream (€7.850) and skimmed milk concentrate (€1.530) are down €50 and €20 respectively this week. The trade in skimmed milk concentrate is under pressure. This is due to competition from milk powder from America.