Stalemate on the butter market paralyzes trade

The DCA butter price has been hovering around €4.600 per tonne since the beginning of March. One week the market rises a few tens of thousands, the next week the profits evaporate again. There is little trade because buyers and sellers cannot find each other.

Producers want a bottom in the market
Butter producers are trying to find a bottom in the market after prices fell sharply in the fourth quarter of last year. The price drop affected the dairy market across the board, increasing pressure on the milk price. Meanwhile, payout prices are sliding to levels of €40 per 100 kilos. This is hard to swallow for dairy farmers, as the costs are still high. Dairy cooperatives, but also private processors, therefore feel the 'moral obligation' to stop the continuous price decline and prevent worse suffering for their suppliers.

This partly works. Butter prices may be stable, but the pressure on the market has not yet diminished. This has to do with the high inventories available. Storage capacity in cold stores and freezers is becoming increasingly full, insiders indicate. Not only in the Netherlands, but also elsewhere in Europe. This is also confirmed by parties in that sector upon request. If storage capacity is already available, you pay the top price. This also inhibits producers' incentive to buy cream on the spot market, although - in relation to the price of butter - this is up for grabs. 

Buyers on hold
This means that butter buyers are in no hurry to purchase and contract volumes. Moreover, the butter market lacks momentum as traders are reluctant to take positions. After all, the potential for growth is limited. It is obvious that stocks will increase further in the coming weeks, now that milk production is working towards the seasonal peak in May. 

In short, there is a stalemate on the butter market. It is difficult to estimate which direction the market will choose, with continued stability perhaps being the most obvious.