Analysis dairy business
High stocks mean the butter market calms down
Broadly speaking, movements in the butter market are quite calm. Recently, prices have shown some upward movements again, but at the same time the market remains dominated by ample supply. In the meantime, consumer prices have fallen considerably.
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In recent weeks, butter prices have fluctuated within a limited range between €4.300 and €4.400 per tonne. This means that the butter market does not demonstrate the erratic character for which it is known. The relatively calm period has been going on for some time. Apart from a turbulent start to 2023, price movements have been calm all year. The large frozen stocks hanging above the market form a shock absorber.
Dichotomy
Although concrete stock figures are not available, many insiders talk about this to a greater or lesser extent. Finding storage capacity in Northwestern Europe is not easy and is also expensive. Product that is traded often no longer has a young age. A division has therefore emerged in the market between frozen butter on the one hand and fresh butter on the other. For fresh butter, a few hundred euros more per tonne must be paid.
Room market is revived
Sentiment on the dairy market has been improving since mid-September. Due to the seasonal decline in milk production, liquid components have become scarcer and more expensive. Cream, for example, rose in recent weeks by about €700 to more than €5.750 per tonne. This is the highest level since the end of December. This means that cream is considerably overpriced compared to butter, to which the butter market then reacts slightly. Current trading prices for butter are quoted at €4.400 per tonne, with which prices are attempting to break out at the top of the range. The question, however, is whether this will actually happen, because there is quite a lot of enthusiasm from the dairy trade to sell product (loss-making or not) and close positions.
Low supermarket prices
The supermarket prices of butter can be called cheap. At Aldi in Germany, butter is offered at dump prices of €1,39 per 250 grams. Other German supermarkets also offer butter cheaply. Just as consumer prices in the Netherlands have also been significantly reduced, to just under €2 per 250 grams for private label brands. The price reductions to 'pre-inflation levels' could boost sales, although it will take some time before the ample stocks are removed from the market. Until then, the butter market will probably remain relatively calm.