The price of butter
Recovery of milk prices globally is the good news contained in Rabobank’s most recent quarterly report on the dairy industry, but there is a bit of a sting in the tail with overall production in Europe moving up more slowly than expected, as both Germany and France fall below last year’s production levels. It may be a challenge for European farmers to take advantage of the uptick in prices, while a global shortage is being seen in butterfat. But at least the support buying is slowing, as less milk has to enter into public stocks in Europe. Phil Hogan isn’t the only buyer in Europe anymore, which is a good thing.
So, we look at more demand for butter and butterfat, and processors will have to take that into account as they supply the global demand for butter, Rabobank notes. “The weak production growth in the EU, at a time of year when butterfat levels are naturally depressed, and the strong demand growth in the US have contributed to a global shortage of butterfat, forcing prices of butter and cream to exceptional levels. In the short term, to alleviate the pressure, processors will certainly be tempted to move farmgate prices up to encourage more butterfat supply,” Kevin Bellamy says.
In other areas, South America is once again returning to growth, and China’s demand continues to outstrip domestic supply improvements. However, weaker farmgate prices are removing smaller producers from the industry there to the benefit of larger operations. Chinese demand will soak up extra supplies from New Zealand, the agricultural bank predicts. It looks like increased trade will be needed to supply areas where there is demand for dairy, and the prices will be there to support the trade. So, as usual, depending on where you live in this world, there is both good and bad news to be had.
