Analysis dairy business
Butter market is weaker than cream market
The cream price is more in line with the price of butter this year than in the past two years. Yet, there is still a significant price difference between the two dairy products that have a correlation with each other. This difference has also increased slightly in recent weeks.
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The main reason is that butter's position is slowly becoming slightly weaker again. Now the DCA quotation for the Northwest European markets has fluctuated slightly throughout the year. But apart from a sharp dip at the beginning of 2023, price developments have been fairly even to almost stable.
However, during this period, concerns among producers and other butter owners are increasing again. Demand is not going away, many stocks are in private hands, exports are very weak and the availability of milk is still ample. In addition, the negotiations with the German retail sector will have a further depressing effect on the butter price. So how far will prices fall? Where is the bottom? Another factor for industrial buyers of butter is that they can sometimes choose other, cheaper types of butter than Dutch or German ones. For example, product from Ireland or Poland. This is significantly more difficult for retail.
Long-term average
To put into perspective any concerns about the level of the butter price: this year too, this price is still well above the long-term average, as is also the case for cream. The DCA room quotation has also fallen sharply this year compared to last year. The price difference compared to butter has also decreased, from roughly €1.100 per tonne price difference to around €600 per tonne. The cream price has now undergone a few more severe fluctuations, at the beginning of this year and during the spring peak. This is also characteristic of the price development of cream. It is more jumpy. Nevertheless, from a structural perspective, the cream price is holding up relatively well. Compared to butter, there is a livelier trade and demand for cream, especially for fresh production. That demand exists both from nearby and from destinations further away.
This means that the cream market now essentially looks healthier than the butter market. It must first try to free itself from the supplies it has come to carry with it. There is clearly no fixed link, but there will naturally remain a strong interaction between the prices of both milk fat products. Butter can always be made from cream, but not the other way around.