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Butter: dairy market voices fierce criticism over EU aid scheme

May 1, 2020 8:00 AM, Der AUDITOR
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FRANKFURT/BRUSSELS. Market players have voiced fierce criticism over the EU’s decision to implement the private storage scheme for skimmed milk powder, butter and cheese in to stabilise the market. There is far too much milk in the market.

EU scheme to make matters worse

Farmers throughout Europe have already been forced to dispose of milk as prices have slumped and supply chains have been disrupted. The coronavirus pandemic has prompted a decline in global demand for milk and other dairy products. Sales are also slow in China. In a bid to stabilise the dairy market the EU has now implemented the private storage scheme for skimmed milk powder, butter and cheese. This scheme finances private storage costs for butter and cheese for 90-210 days. Farmers have, however, voiced fierce criticism in stating that the scheme is anything but sustainable. Although the scheme is appropriate for tackling seasonal fluctuations in the dairy market, the current crisis requires a more prolonged solution as demand will not revive so quickly again. There is the risk that large volumes will be stored that will eventually need to be sold again. Delays and wrong responses also prompted EUR billions of loss in the dairy market crisis in 2015/2016.

Further declines in average EU butter price

By contrast, demand has revived for bulk butter, which has finally driven up prices at the lower end of the range. Prices range at EUR 2.60-2.70/kg at the Butter and Cheese Exchange in Kempten. Bulk butter prices in Poland remain firm at EUR 2.80/kg EXW. Although the average price for butter has declined by 7.4% in the EU over the last few weeks and currently stands at EUR 2.92/kg, market players are urged to pay attention to the US, where the prices for butter and cheese are more competitive. As the USDA Agricultural Marketing Service reports, there are copious volumes of cream in the US, which have driven up churning. Producers are desperately trying to avoid having to waste cream. Although retail demand has spiked, bulk butter sales are limited as demand has stalled in the food service sector.

Butter

Location

Price

EXW Poland

EUR 2,800/mt

EXW Germany

EUR 2,650/mt

EEX

EUR 2,627/mt

GDT

USD 4,117/mt

Trade sources

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