Dairy Market Report – February 2012

DAIRY MARKET REPORT – FEBRUARY 2012

Since the awareness, prior to Christmas, of the impending arrival of butter from New Zealand, the butter market dropped dramatically and customers realised that they should cover through for Q1.  Because the weather over the Christmas period was mild there was more milk available and cream was churned into butter.  With the weakness of the Euro v Sterling it also meant that exports of cream to the continent were not as attractive as previously which kept butter prices at a lower level than in the winter of 2011.

At the moment there is stability in pricing, however with Private Storage Aid looming on the horizon this could possibly change the situation and perhaps indicate to customers and manufacturers there could be a reason to place butter into this scheme whilst prices are lower than usual.  If this did occur it could well take butter from the open market and tighten supply.  But, as always, until we get nearer to the time it is purely speculative.  The EU Commission have not, as yet, published the aid available for PSA this year and this might make potential uptake of the scheme an easier decision to reach for interested parties.

Powder prices however, are increasing as there is more demand from world markets at present.

Cheese prices have settled but by relatively small amounts compared to the movement in butter prices.  Continential cheeses including cheddar have seen the benefit of the improved Sterling/Euro exchange rate.  However, UK cheddar prices have not felt the need to respond fully to these prices as they feel that demand and stock are in balance.  Milk prices on the continent are holding or starting a slow recovery and the slight fall back in the exchange rate has steadied the market.  With peak milk production on its way it is still not clear if this situation can hold.