Milk league: summer butter beats protein for June

Processors reacted as predicted to positive summer market signals, with most increasing prices.

Jack Kennedy

2 August 2017

Milk league: summer butter beats protein for June

In August last year, butter was trading at less than $3,000/tonne. It has almost doubled in value and is now almost twice the value of whole milk powder per tonne.The summer heat finally melted butter prices slightly this week. This was the first week since February 2017 that we saw the first significant, yet relatively small dip, in commodity prices as the New Zealand GDT auction recorded a 1.6% drop. Interestingly, butter was down by 4.9% to finish at $5,747/t while whole milk powder was up 1.3% to $3,155/t.

In August last year, butter was trading at less than $3,000/tonne. It has almost doubled in value and is now almost twice the value of whole milk powder per tonne.

The summer heat finally melted butter prices slightly this week. This was the first week since February 2017 that we saw the first significant, yet relatively small dip, in commodity prices as the New Zealand GDT auction recorded a 1.6% drop. Interestingly, butter was down by 4.9% to finish at $5,747/t while whole milk powder was up 1.3% to $3,155/t.

These prices in some way represent the current value the market is putting on fat relative to protein. Some of our Irish processors have changed their ratio to reflect this change in value over the last number of months, while some have not.

Hard look at the figures

I would say Kerry, Lakeland, Glanbia and Tipperary Co-op have to take a hard look at the figures as the two-to-one value they are putting on protein relative to fat is not what the market is saying now or has been saying for the last number of months.

In general, the positive summer market signals continue for dairy commodities and processors have reacted as predicted last month by increasing June prices accordingly. Most have increased by at least 0.14c/kg MS (1c/l) for June.

Heavyweights

The June league order remains relatively unchanged, with two heavyweights – Glanbia and Kerry – swapping positions at the tail of the table. Kerry is now bottom of the league table. Both are almost 0.2c/kg MS (1.5c/l) off the pace set by the west Cork co-ops.

The west Cork Co-ops are out on top for June and this price excludes the milk quality bonus (0.5c/l) that is available for top-quality milk (milk under 200,000 SCC) which over 70% of west Cork suppliers will get.

Aurivo is top of the second division after a decent price rise from May ahead of big players Dairygold and Arrabawn. Lakeland brings up the rear of division two but it in turn is ahead of LacPatrick, who head up division three.

Unfortunately, the third division holds a big volume of milk, with Glanbia and Kerry paying €4.35kg milk solids (effectively 31c/l ex-VAT). On average, the price paid for June milk was €4.47/kg milk solids, or 31.9c/l ex VAT at 3.3% protein and 3.6% fat.

Pressure to change fat prices