Butter: Market Situation Overview
Source: The DairyNews
The global butter market in 2023 was estimated at 59.85 billion US dollars, and it is forecasted to grow to 72.97 billion US dollars by 2030, with an average annual growth of 2.9% during this period.
According to the Agriculture and Horticulture Development Board (AHDB), in the first quarter of 2024, the availability of most dairy products in the EU increased. However, butter bucked this trend, and available supplies continued to decrease amid a reduction in production. Milk deliveries in the EU in the first quarter of 2024 increased by 1.5% year-on-year to 35.29 billion liters. The increase in milk deliveries helped boost cheese production, while the production of butter and cream remained low.
Butter supplies sharply decreased as processors produced less butter. Available butter stocks decreased mainly due to lower production and imports. Export volumes also remained low during the period. Demand was limited as buyers were well stocked for Q1. Nevertheless, retail demand began to improve towards the end of the quarter. Higher cream prices limited butter production rates.
According to the latest short-term forecast of the EU, the European Commission expects milk deliveries for processing to increase by 0.4% year-on-year in 2024 due to higher yields and stabilizing milk prices. This will lead to an increase in dairy product production. Going forward, a decrease in global demand is likely to impact the growth rates of dairy product exports.
In early July, prices for all exchange-traded dairy products were declining on the Chicago Mercantile Exchange - except for butter prices, which were rising.
Regarding New Zealand, in June, ANZ agricultural economist Susan Kilsby noted that high demand for anhydrous milk fat (AMF) and butter was driving up farm milk prices. However, the period of high prices for milk fat may be coming to an end. Kilsby says that futures prices indicate that the price increases for AMF and butter may be relatively short-lived, and the forward curve shows that prices are dropping relatively quickly. "Nevertheless, even if prices drop a bit, they will still be relatively high," she says.
She notes that New Zealand supplies 85% of AMF exported from the five largest dairy product exporting regions, with the other four being from the EU, USA, Australia, and Argentina. New Zealand supplies about 50% of the butter sold on the global market.
According to Kilsby, last year, Southeast Asia accounted for just over 25% of AMF exports from New Zealand. The next largest markets are China (20%), North Africa (20%), and the Middle East (15%). These four regions are also the largest markets for butter sales. China remains the largest overall market.
Kilsby noted that both the EU and the USA are major producers and consumers of butter. "Sometimes tariffs mean that prices in these markets are significantly different from global prices, which limits the flow of imports. However, currently, the prices of butter on the global market are roughly the same as in the domestic markets of the EU and the USA."
At the end of June in the United States, prices for butter on the Chicago Mercantile Exchange (CME) were still over 3 dollars per pound. While prices cannot compare with the records set before last fall's holiday season, they remain at levels that are usually not seen in spring or summer. For most of May and June, the price of butter on the CME exceeded 3 dollars, and futures prices remain at or above 3 dollars per pound until the end of this year. In addition, the US continues to struggle with bird flu, which has affected dairy herds. This has also affected the pace of milk production.
At the beginning of July, global prices for butter rose to record levels. The Australian division of Rabobank reported that the spot price for butter in Oceania had risen by about 35 percent this year and had surpassed 7000 US dollars per ton (10,400 Australian dollars per ton) for the first time. Despite having a well-developed domestic dairy industry, Australia is a net importer of butter and last year imported a record 47,500 tons. Rabobank's senior dairy products analyst Michael Harvey stated that there are a range of supply and demand issues pushing global butter prices to "staggering levels."
"The Northern Hemisphere, especially Europe, is approaching the seasonal peak of consumption of high-fat products such as ice cream, which reduces their market supply of cream and leads to an increase in butter production, which has side effects," he said. "In addition, butter buyers worldwide do not have excessive inventory coverage, which means they are buying butter hand-to-hand on a spot basis, creating volatility."
In mid-July, according to the USDA, butter production remained stable and slightly exceeded the level of the same period last year.
It should be noted that according to the latest trades on the GDT exchange, the average price for butter was $6,546 per ton, which is 10.2% less than at the trades two weeks earlier.
Butter supplies sharply decreased as processors produced less butter. Available butter stocks decreased mainly due to lower production and imports. Export volumes also remained low during the period. Demand was limited as buyers were well stocked for Q1. Nevertheless, retail demand began to improve towards the end of the quarter. Higher cream prices limited butter production rates.
According to the latest short-term forecast of the EU, the European Commission expects milk deliveries for processing to increase by 0.4% year-on-year in 2024 due to higher yields and stabilizing milk prices. This will lead to an increase in dairy product production. Going forward, a decrease in global demand is likely to impact the growth rates of dairy product exports.
In early July, prices for all exchange-traded dairy products were declining on the Chicago Mercantile Exchange - except for butter prices, which were rising.
Regarding New Zealand, in June, ANZ agricultural economist Susan Kilsby noted that high demand for anhydrous milk fat (AMF) and butter was driving up farm milk prices. However, the period of high prices for milk fat may be coming to an end. Kilsby says that futures prices indicate that the price increases for AMF and butter may be relatively short-lived, and the forward curve shows that prices are dropping relatively quickly. "Nevertheless, even if prices drop a bit, they will still be relatively high," she says.
She notes that New Zealand supplies 85% of AMF exported from the five largest dairy product exporting regions, with the other four being from the EU, USA, Australia, and Argentina. New Zealand supplies about 50% of the butter sold on the global market.
According to Kilsby, last year, Southeast Asia accounted for just over 25% of AMF exports from New Zealand. The next largest markets are China (20%), North Africa (20%), and the Middle East (15%). These four regions are also the largest markets for butter sales. China remains the largest overall market.
Kilsby noted that both the EU and the USA are major producers and consumers of butter. "Sometimes tariffs mean that prices in these markets are significantly different from global prices, which limits the flow of imports. However, currently, the prices of butter on the global market are roughly the same as in the domestic markets of the EU and the USA."
At the end of June in the United States, prices for butter on the Chicago Mercantile Exchange (CME) were still over 3 dollars per pound. While prices cannot compare with the records set before last fall's holiday season, they remain at levels that are usually not seen in spring or summer. For most of May and June, the price of butter on the CME exceeded 3 dollars, and futures prices remain at or above 3 dollars per pound until the end of this year. In addition, the US continues to struggle with bird flu, which has affected dairy herds. This has also affected the pace of milk production.
At the beginning of July, global prices for butter rose to record levels. The Australian division of Rabobank reported that the spot price for butter in Oceania had risen by about 35 percent this year and had surpassed 7000 US dollars per ton (10,400 Australian dollars per ton) for the first time. Despite having a well-developed domestic dairy industry, Australia is a net importer of butter and last year imported a record 47,500 tons. Rabobank's senior dairy products analyst Michael Harvey stated that there are a range of supply and demand issues pushing global butter prices to "staggering levels."
"The Northern Hemisphere, especially Europe, is approaching the seasonal peak of consumption of high-fat products such as ice cream, which reduces their market supply of cream and leads to an increase in butter production, which has side effects," he said. "In addition, butter buyers worldwide do not have excessive inventory coverage, which means they are buying butter hand-to-hand on a spot basis, creating volatility."
In mid-July, according to the USDA, butter production remained stable and slightly exceeded the level of the same period last year.
It should be noted that according to the latest trades on the GDT exchange, the average price for butter was $6,546 per ton, which is 10.2% less than at the trades two weeks earlier.
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