Is the overheated butter market now slowing down?

After a relatively quiet second and third quarter, the last quarter of this year is much more exciting. Since the end of August, the DCA butter quotation has already increased by €1.000 to €5.350 per tonne. This is the highest level in almost a year. Few market insiders had seen this price increase coming. In fact; some traders even expected butter prices to fall. This is due to the high frozen stocks that were still available from the summer.

Retrospectively, these frozen stocks appear to have been overestimated. In addition, very little fresh butter has been produced in recent months, because this simply did not compare with the high cream prices, which briefly fell below €7.000 per tonne. Based on this level, butter should theoretically yield around €5.800 per tonne to be produced profitably. This means that butter producers who are dependent on external cream supplies do not produce more than is necessary to meet delivery obligations. As a result, the supply of fresh butter supplies is also halting.

Doubt in the market
Although butter should rise further based on the cream quotation, this does not seem to be happening. Butter buyers are expressing resistance to the rapid price increases. In the meantime, the higher butter prices are also having an effect on the store shelves. For example, Aldi in Germany recently increased consumer prices again. At the same time, milk supplies will increase again in the coming weeks, meaning that a correction for the cream price is likely. The availability of butter will benefit this.

It is true that the Christmas question will arise again from mid-November. A decline in butter prices is therefore unlikely. Therefore, a more stable market picture appears to be on the way in the remainder of 2024.