The strong recovery in butter markets is driving sentiment currently, with last week’s Eurex Index suggesting an unbelievable value of €3,972 for butter.  This figure may have an associate health warning, as it is an average figure of the Dutch, French and German indices, and while the Dutch and French figures are both €3,800, the German figure is €4,225. It remains to be seen if that figure can be sustained, as it is the highest value to be reported from Germany in almost 3 years. The SMP Index, however, whilst growing steadily, is still at only €1,927, and reflects the effect of the overhang of around 300,000 tonnes of SMP on buyer sentiment.

The generally positive sentiment, however, is likely to be boosted by news that UK milk production continues to lag 6-7% behind last year, and across the EU, milk supplies are reducing, particularly in France, Germany, Poland, and Denmark. Indeed, Dutch milk production, which like Ireland is still growing, has, like Ireland, begun to slow down.

The improving sentiment is also visible in the Ornua Purchase Price Index, with the August figure having rebounded by 4 to 85.8. While this is a welcome recovery, it still values milk somewhere in the mid 20’s, and demonstrates that whilst butter markets are strong, we need a sustained recovery in powder prices to facilitate a return to milk prices which farmers would deem to be sustainable.

By TJ Flanagan

CEO