The big mover in the dairy markets this week was butter, which took a terrible tumble in Europe, dropping by €600/t according to market reports.

That puts the drop at over €1,035/t in just three weeks, which is almost a 13% drop.

There are a couple of factors in this and it’s hard to split them up, but buying activity usually drops now anyway as Christmas and new year orders are filled.

As the product was scarce, the price was high, so removing that demand frenzy has naturally reduced the price. What is harder to tell is whether this is a signal of a more medium-term drop in demand.

Looking at the futures for butter in Europe, the price drop of recent weeks has exceeded what the futures market was predicting, but the futures are also predicting further price drops over the coming weeks/months.

The futures are predicting butter to be around €6,600/t to €6,800/t from March 2025.

The flip side to that is that the outlook for skim milk powder (SMP) is more positive, with futures moving up over the coming months, so the drop in butter should be somewhat offset by increases in SMP.

This is important from a milk price perspective as you can’t make butter without producing skim.

On skim, there was no movement in Europe this week, with prices steady at €2,580/t. Cheddar cheese at €4,790 dropped by €40/t while whole milk powder at €4,290/t dropped by just €10/t. So, all in all, markets are steady, with the exception of butter. All eyes will be on what happens in early January.