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Butter: EU to pay close attention to US competition

April 24, 2020 12:33 PM, Der AUDITOR
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FRANKFURT/BRUSSELS. As US butter is trading lower than in the EU market players are urged to pay close attention to international competition. Panic buying has reportedly stopped in Germany. The dairies are, nevertheless, confronted with a shift in demand.

EU prices start to bottom out

Reports state that panic buying is no longer an issue in Germany as supermarket sales have returned to normal levels. Problem, however, ias that the dairy industry is still struggling with the shift in demand and shipments, away from the catering market and bulk buyers to the supermarkets. There is also too much milk in the market. As milk arrivals are nearing their seasonal high, the dairies are talking about cutting production.

Butter deliveries to the supermarkets have normalised again indicating that butter still needs to be sold before orders will rise. Market players reckon that the asparagus season will drive up retail demand. At present demand has already revived for bulk butter, which has finally prompted prices to bottom out at EUR 2.50-2.70 per kg at the Butter and Cheese Exchange in Kempten. Bulk butter prices in Poland have even recovered to EUR 2.80 per kg EXW again, after plummeting to EUR 2.70 per kg last week. Although these attractive prices have prompted buyers to frequently enquire for long-term contracts, the sellers refuse.

Butter

Location

Price

EXW Poland

EUR 2,800/mt

EXW Germany

EUR 2,600/mt

EEX

EUR 2,590/mt

GDT

USD 4,117/mt

Trade sources


Drastic price cuts in the US

Although the average price for butter has declined by 10.4% in the EU over the last few weeks and currently stands at EUR 2.95 per kg, market players are urged to pay attention to the US, where prices are more competitive. According to the USDA, the average US butter quotations have taken a dip to USD 2,793 per tonne in March, whereas the dip in prices in the EU has been far less drastic as the average EU butter quotation stands at USD 3,506 per tonne. The Covid-19 pandemic has a far more drastic impact on the US butter market than on the EU butter market. As the USDA Agricultural Marketing Service reports, there are copious volumes of cream in the US, which have driven up butter production. Although retail demand has spiked, bulk butter sales are limited as demand has stalled in the food service sector.

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