Butter market seems to be weakening beneath the surface

After a strong third quarter, butter prices in Northwestern Europe stabilized at around €5.500 per tonne just before Christmas. Subsequently, the market remained quite stable. Butter has the image of a fickle dairy commodity, but cheese and milk powder have been more volatile in recent weeks.

Higher supermarket prices
The butter market looks reasonably balanced. Fresh product is available in limited quantities and frozen stocks are fairly manageable. Demand should still start in early 2024, but that is normal for this time of year. Dairy sales are generally somewhat weaker in the first quarter. That seems to be the case this year too.

Due to the price increase in the fourth quarter, butter has become somewhat more expensive in supermarkets. A price increase was already implemented in October and November and Aldi again increased prices for 250 gram packages at the beginning of January. This development could dampen consumer demand in 2024.

Room more attractively priced
The correction of cream prices around Christmas has made it attractive again for dairy products without their own milk supply to produce fresh butter. This is reportedly being done more often. Although the butter market feels broadly stable in early January, current market signals point to a weakening rather than the other way around.

The futures market price for butter on the EEX in Germany peaked above €5.700 per tonne at the end of last week, but has since fallen back more than €100. The first signals are also coming from physical trade this week that prices are slowly declining.