Butter
Small price changes in the three main export regions
Europe
The buyside suddenly went quiet in mid-June
After some further price appreciation in June, the EU butter price took a hit in recent weeks. The buyside was active as they did not want to repeat last year’s scenario of running behind while prices continued to rise throughout the second half of the year. However, when prices peaked at EUR 7500, the buyside suddenly went silent while availability was good. As a result the price quickly dropped to EUR 7100 currently. There is no purchase interest for Q3 anymore and trading volumes are limited. Q4 prices are still at a modest premium but it remains to be seen if that premium will hold.
Americas
US export window remains open
The US butter market has once again been surprised by the numbers of the Cold Storage Report that stated that the US butter stocks in May have declined a little faster than the market expected, minus 5% instead of minus 2%. This most likely represents the strong butter exports of recent weeks to Asia and Europe. Domestic retail demand is also strong, with butter now sold as a premium product rather than a traffic generating but zero-profit product. Consumption has proven to be resilient to the higher price levels even though going forward the usual seasonal slowing into holiday-mode is expected to occur. Supply wise there is still a record fat content in the raw milk and this abundance of cream will for a large part find its way into the butter churns. In this mix of low inventories, high export demand, solid local demand and good cream supply the domestic price has appreciated slightly to USD 2.58/lb (5690/t) ex works. Export butter commands a premium about USD 12cts/lb in California and USD 10cts/lb in the Mid-West leading to a USD 5950/t ex works price, which remains very competitive compared to EU and Oceania prices. As long as this continues to be the case this paradox of US exporting butter although it is a net fat importer is likely to persist.
Asia-Pacific
Exceptionally strong demand for butter on early July GDT
Despite a strong increase in butter supply on the early July GDT session, the price remained historically high, because demand was exceptional. The main buyer was China, and SE Asia followed at a distance. The spot price for butter is USD 7825 FOB. The AMF price came down a bit further on GDT, as the increased supply was not entirely absorbed. There is probably stronger downside potential in AMF than in butter. However, post GDT there was good AMF demand for end Q3 and Q4 delivery dates, and the spot price is now USD 7225 FOB.
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