Butter markets will dictate direction of milk pricesStaff Writer | November 17, 2017
The current level of farmgate milk prices is largely down to the high value for butterfat, AHDB says.
Dairy Prices for cheese are relatively stable
Typically, returns to butter account for around 45-50% of the value of AMPE, but recently this has risen to more than 70%.
Prices for butter dropped by 18% on UK wholesale markets in October, raising some concerns about the impact of this on future farmgate prices.
An overview of the market balance however suggests there is still much to support butter prices going into the spring, and the recent drop in prices is an adjustment in sentiment.
- EU butter stocks are tight, running at around 60% of typical levels for the majority of 2017*
- EU butter production in the twelve months to Aug-17 is down 5.7%, with UK butter production down 12.1%
- EU milk equivalent values for cheese production have been favourable to butter/SMP
- SMP prices constrained by high intervention stocks limiting returns from butter/SMP production
In the absence of significantly more milk availability for butter production in the spring, the tightness in the market will remain, although perhaps not to the degree seen in 2017. ■