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Butter: bye bye pre-pandemic market

May 22, 2020 3:16 PM, Der AUDITOR
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FRANKFURT/BRUSSELS. Although it is generally being reported throughout Europe that dairy prices have bottomed out as restrictions are being eased, traders are anything but optimistic. Eating habits have changed with lasting effects and cheaper offers are not designed to change this. Market players, in other words, discard any illusions that sales volumes will return to pre-pandemic levels.

Change in eating habits has impact on dairy market

While der Butter and Cheese Exchange in Kempten in Germany, for instance, reports that the prices for fat have partly revived to pre-pandemic levels since demand is high in the food service sector as ice cream production is up, traders state that the dairy market is very hard hit. Surplus raw milk supplies are adding enormous pressure to the market as raw milk production is up in Poland, France and Ireland. Market players here report that prices may have bottomed out, but on a low level. Although the peak may have passed in terms of raw milk arrivals in Germany, the dairies still need to process these supplies and sell their products.

This is rather difficult since market players are convinced that eating habits have changed with a lasting effect. The pandemic has, in fact, considerably slowed down ice cream sales in Germany. Sales for cream have taken a 50% dip. Bakeries in Germany have suffered a 40% loss in sales. Although cafes have reopened again, they can only take in 50% of their customers as a safety distance of 2 metres needs to be observed and it is small wonder that older people prefer not to visit such places anymore. In addition, it should be noted that as many as 10.5 million people are working short time in Germany, which puts a cap on purchasing power. Whole industries are in a sorry state.

Cheap offers are also not producing the desired effects. Although supermarkets are offering steaks at prices as low as EUR 0.50 per piece, large volumes still need to be disposed. Problem is that consumer demand is still far from pre-pandemic levels. The retailers are, nevertheless, stocking up for the public holidays and retail demand for packet butter is up in Germany. This has driven up demand for bulk butter, which is trading in a range of EUR 2.70-3.00 per kg, depending on supplier. At EUR 3.30 per kg prices have also revived in Poland. These prices, however, still range well below the pre-pandemic levels. Demand is, in addition, expected to be more subdued again once the storage facilities have been refilled.

Butter

Location

Price

EXW Poland

EUR 3,300/mt

EXW Germany

EUR 2,950/mt

EEX

EUR 3,000/mt

GDT

USD 3,803/mt

Trade sources

Recovery in EU butter prices

As the European Milk Market Observatory reports, first quarter butter production is up 3.2% on last year. Last week’s average EU butter price has risen to EUR 2.88 per kg. Although this is only 0.8% down on last month, average EU prices still range around 30% below last year’s levels. At USD 2,751 per tonne the average US butter price may have recovered but is still much more competitive than the average EU butter price of USD 3.162 per tonne. In Oceania, the average butter price ranges at USD 3,938 per tonne.

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