European butter prices fell sharply last week, dropping from close to EUR 5,000/mt to as low as EUR 4,200/mt within a few days. The correction followed an increase in offers entering the market at the EUR 5,000/mt level, covering both fresh and older volumes. Cream is widely available across Europe at below EUR 4,000/mt, making fresh butter production economically straightforward at current price levels.
The supply backdrop is a contributing factor. German milk intake is up 6.7% at the start of March, French intake is up 5.5% year on year, and New Zealand milk solid production in February grew 7.39% year on year. With many buyers having already covered significant volumes for Q2 through Q4, there is less urgency to chase prices higher.
In contrast, SMP prices have continued to firm. The US market is playing a significant role: skimmed milk in the US is being directed towards other applications rather than NFDM, keeping domestic NFDM supply constrained and the CME call price at USD 1.92/lb. European SMP is broadly following the US and New Zealand markets higher. NZ SMP has traded at a premium to European SMP, though a decrease on this week’s GDT Pulse event reduced that premium to around USD 100/mt.
WMP prices have remained stable. With cocoa prices having eased, chocolate producers are reported to be resuming WMP purchases to support new production volumes.
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