High butter stocks put pressure on consumer prices

Trading activity in the butter market is currently low, as has been the case for some time. Producers are stuck with large inventories that are difficult to sell. Stocks will probably continue to rise for a while, because butter production in Europe usually peaks in May. There are signals from the market that finding storage capacity in cold stores is a difficult and expensive affair.

Limited demand
Butter buyers are watching their backs, stimulated by the ample supplies. The purchasing interest that exists extends mainly to the third and fourth quarters. Often the bids are below current market prices, which means that buyers and sellers usually miss out on each other. Demand for prompt deliveries is very limited. Trading companies are also not involved in purchasing volumes from a speculative point of view. This may mean that there is not much confidence in the market. 

Remarkably, the DCA butter price has increased in recent weeks, to €4.730 per tonne. This is the highest level since early March. The ZuivelNl listing is also improving. The upward movement is a signal that the bottom under the butter market is quite firm. This is because prices were already significantly marked down at the end of last year. Butter is likely to benefit from the better sentiment on the dairy market, which is especially evident in cheese and the liquid segment.

Promotions in supermarkets
Consumer sales have taken a hit in recent months due to sharply increased prices. On Dutch store shelves, the prices of premium brands rose to €3,50 per 250 grams, or even higher. Yet prices are slowly starting to fall. Significantly lower market prices are now also reflected in lower consumer prices. In Germany, supermarkets are even doing massive amounts of butter again. The actions are so eye-catching that German media report them. Discounters such as Aldi, Kaufland, Edeka and HIT are offering butter this week for prices (well) below €1,50 per 250 grams. By Dutch standards that is dirt cheap. 

Such favorable prices could significantly stimulate sales and that also seems to be the aim of the promotions. However, it is not expected that market prices for butter will increase significantly in the coming weeks, as the ample stocks have not simply been reduced. Since the bottom in the market is quite firm, a continued stable market picture is obvious.