The retail price of butter could soar by up to a third over the next few months, analysts have warned.
The wholesale butter price has leapt from £2,000/tonne in August to almost £3,500 [PTF] twice what it was a year ago as a result of global markets stabilising and the EC placing butter into intervention.
So sharp has the increase been that early last month butter was up to 10% cheaper in supermarkets than on the spot market.
The nature of forward purchasing means suppliers are still tied to the low prices they agreed when the markets were weaker and more butter was available. But sources say manufacturers will look to renegotiate prices post-Christmas to reflect the higher value of butter.
"Some contracts will have to be renegotiated," said PTF dairy analyst Mike Bessey. "It's odds on the butter price will have to go up a bit it could go up between a quarter and a third if market conditions stay as they are."
Prices are already starting to move upwards. Last week the cheapest 250g pack of own-label butter in the big four averaged 88p [GPI], 16% more than a month earlier.
As suppliers negotiated on variable-length contracts, prices were likely to move up gradually rather than in one go, claimed DairyCo analyst Rob Sperring. "Processors will have more information to renegotiate their products at a higher price, and retailers won't want to take a cut in their margins," he said.
Although the EC is sitting on large volumes of intervention butter, Sperring claimed the Commission would not risk releasing stocks rapidly and crashing markets again. Besides, 60,000 tonnes of the 80,000 tonnes already in intervention has been earmarked for release into social welfare schemes next year.
Retailers and manufacturers have been trying to keep prices down, with unprecedented promotional activity on leading brands. However, as revealed in The Grocer last week, buyers are keen to reduce the amount sold on deal to avoid category deflation.
Read more
Butter category devalued by ‘promotional junkies’ (28 November 2009)
Hot Topic: Vicious price war has pushed promotions to unprecedented levels (28 November 2009)
The wholesale butter price has leapt from £2,000/tonne in August to almost £3,500 [PTF] twice what it was a year ago as a result of global markets stabilising and the EC placing butter into intervention.
So sharp has the increase been that early last month butter was up to 10% cheaper in supermarkets than on the spot market.
The nature of forward purchasing means suppliers are still tied to the low prices they agreed when the markets were weaker and more butter was available. But sources say manufacturers will look to renegotiate prices post-Christmas to reflect the higher value of butter.
"Some contracts will have to be renegotiated," said PTF dairy analyst Mike Bessey. "It's odds on the butter price will have to go up a bit it could go up between a quarter and a third if market conditions stay as they are."
Prices are already starting to move upwards. Last week the cheapest 250g pack of own-label butter in the big four averaged 88p [GPI], 16% more than a month earlier.
As suppliers negotiated on variable-length contracts, prices were likely to move up gradually rather than in one go, claimed DairyCo analyst Rob Sperring. "Processors will have more information to renegotiate their products at a higher price, and retailers won't want to take a cut in their margins," he said.
Although the EC is sitting on large volumes of intervention butter, Sperring claimed the Commission would not risk releasing stocks rapidly and crashing markets again. Besides, 60,000 tonnes of the 80,000 tonnes already in intervention has been earmarked for release into social welfare schemes next year.
Retailers and manufacturers have been trying to keep prices down, with unprecedented promotional activity on leading brands. However, as revealed in The Grocer last week, buyers are keen to reduce the amount sold on deal to avoid category deflation.
Read more
Butter category devalued by ‘promotional junkies’ (28 November 2009)
Hot Topic: Vicious price war has pushed promotions to unprecedented levels (28 November 2009)
No comments yet