EU butter prices have risen significantly during the past month. The Mintec Benchmark Prices (MBP) for Netherlands unsalted butter EXW (spot) reached EUR 4,730/MT at the last assessment on the week of 6th October. This price represents a rise of 8.7% against the previous week and 19.2% month-on-month. The EU last witnessed similar price levels for butter in January 2019.
Aiming to achieve greater returns, EU milk processors have channelled most of the available milk into cheese vats due to higher demand at elevated prices. This has reduced the EU butter production by 1.3% year-on-year between January and July 2021 according to Eurostat. Also, high EU cream prices have further pushed up butter prices. Uncertainty with EU butter inventories, and an uptick in short term commitments as foodservice sector fully opened across Europe, led to this price momentum, with most buyers having reasonable coverage through this year.
Butter futures on the EEX trended higher on the nearby, with the Dec-21 contract trading at €4,750/MT on 11th September, followed by a backwardation forward curve out until September 2022.
With an increasing EU butter price, more price-sensitive markets are lowering their purchases, contributing to a drop of 20% in EU exports during the Jan-Jul period which achieved record-high in the 2021 calendar year. However, more butter is expected to be produced in the upcoming months to cover the increasing forecast domestic demand in the 2021 calendar year (+0.6%). As result of this expected volume production increase, it is forecast that EU butter prices will converge with the rest of the world, and reach competitive prices in the global markets.