Can whipped butter prices hold up?

The tension on the butter market has increased considerably due to the war. The day after the Russian invasion of Ukraine, the market slumped, followed by a price rally and prices peaked above €7.500 per tonne. The DCA quotation remained slightly below that level. Prices have fallen back somewhat since the beginning of April. The cream price simultaneously peaked at an unprecedented level of €9.000 per tonne. Cream is therefore overvalued compared to butter, which is a result of good demand from the fresh segment.

At the moment, the room for increase for butter appears limited. The high prices mean that speculators are not getting in now for fear of a price correction. Moreover, recording volumes is a drain on working capital. A truckload of butter costs more than €200.000. If you want to capture a serious volume, the amounts run into the millions. This makes trading parties reluctant.

Market characterized by scarcity 
Moreover, finding volumes at all is a challenge. The market is still characterized by scarcity, fueled by the persistently low milk supply in Northwestern Europe. Typically, the spring and summer period is used by producers to build up stocks and then deliver them in the second half of the year, when the demand for butter increases seasonally. So far this has not happened, insiders indicate.

On the German futures market EEX, most monthly contracts have fallen to less than €7.000 per tonne. This raises the expectation that the butter market has reached its peak for the time being. After Easter, the market is usually less bullish anyway. The milk supply then increases seasonally, while demand is calmer in the summer. The fundamentals change in the autumn, when demand often increases again and milk production decreases. However, it remains to be seen whether the butter market will feel calmer during the summer months this year. The butter market is currently going up and down, fueled by nervous sentiment.