Record high butter prices 'unlikely to ease' for months

Manufacturers are unlikely to see butter wholesale prices ease for “at least a few months”, Informa Agribusiness Intelligence has warned.

UK wholesale butter prices have hit record highs of £4,225/tonne [Mintec], up 108% year on year. Arla boss Peder Turborgh has warned of a a major butter shortage by Christmas.

Prices in the EU are also up by as much as 90%-100% compared with last year, while global butter prices reached the highest level on record last quarter at $5,768/Mt - up 17% from Q2 2017, according to the Global Dairy Trade quarterly.

The surge in European butter prices is the result of a drop in milk production in the EU’s two biggest milk-producing states, France and Germany, as well as in the UK, says Richard Dillon, head of dairy at IEG Vu, Informa Agribusiness Intelligence.

With milk supplies scarce, processors have been prioritising cheese “because there are better returns and because they are committed to supply regular customers both in Europe and abroad,” he adds.

Europe is currently likely to end up the year at least 50,000 tonnes short compared with the amount of butter it got through last year, he predicts.

“The EU-28 produced 744,100 tonnes of butter in the first four months of this year, according to official figures, down 5.3% - or 41,600 tonnes - from the same period last year,” he adds.

“UK output in this period was down 11.6% to 50,300 tonnes, or 6,600 tonnes less than the same four months of last year.”

It’s not all bad news for butter, with Informa Agribusiness Intelligence’s IEG Vantage service indicating a global recovery in milk production in the second half of 2017, albeit from low levels. “But with futures prices remaining high, it seems unlikely that butter wholesale prices will ease substantially for at least the next few months,” adds Dillon.