Butter
EU about to become the cheapest origin?
Europe
Oversupply situation continues
The mismatch remains unsolved in the EU butter market with spot supply far greater than spot demand. Spot prices have dropped a little to EUR 3600-3700 ex works but the domestic buyside is simply not in need of any more product. Exports are happening but the US remains the cheapest origin so far. In the US the upward price pressure is growing though. This may be the reason that the EU sell side generally remains unwilling to look at further forward deals right now and continues to expect that the market will come their way.
Americas
Time for change?
During May the US butter price continued to trend further down to USD 1.52/lb, but in the first week of June the spot price recovered to USD 1.71/lb (3770/t) ex works. Cold storage levels remain extremely low despite good butter production. This main seem contradictory but the cause is the strong butter export performance that the US has been displaying in the past 18 months. It was in our December 2024 Market Watch that we first wrote about US butter exports towards the Middle East, Asia and the EU. At that time we stated that – with the US being a net importer of butter fats – this was an exceptional and temporary situation. Not so temporary after all, apparently, as in all of the following months US butter continued to find a home in export destinations. Even now, when the domestic market is getting noticeably tight, exports continue as there has been substantial forward selling to export destinations. With the summer months approaching the domestic cream supply is tightening and it may well become a question how much longer the US can afford to export butter at the current prices. Cream prices are trending upward already and if fresh butter production starts to suffer, microfixing may reoccur with obvious effects on the butter inventory and price levels. As EU butter stocks are very large at the moment we may well be on the brink of a shift in trade flows and the termination of the temporary situation in which the US was a major butter exporter.
Asia-Pacific
Seasonally low volumes
Like in the milk powders the APAC butter market is quiet. Volumes on offer on GDT are at the seasonal low point and this means that price movements are easily misinterpreted as they can get distorted by a deal that would otherwise be regarded as an outlier. Demand is generally done for Q3 and there are indicative offers for Q4 at USD 5800 for butter and USD 6500 for AMF, both FOB and for NZ product. The premium for Oceania butter has been shrinking a little compared to prices in the US and the EU but it remains very high.
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