According to the European Commission's Milk Market Observatory this week, the rise in butter prices accelerated in the past week with a 4.8% increase across the EU. At €5,500/t, the commodity is at an all-time high and has nearly doubled in price in the past year.
Source: European Commission
While the price of butter in Ireland was under the EU average at €4,390/t, major dairy producers such as the Netherlands and EU leader Germany saw prices rise above €6,000/t.
The market's craving for butter is increasingly looking like a bubble, and Ornua's head of trading Joe Collins recently told the Irish Farmers Journal that current price levels were not sustainable. He warned that some customers may turn away from butter because of increasing costs.
Intervention
There is an increasing disconnect between the price of butter and that of skimmed milk powder (SMP), one of the other major commodities exported by Irish dairy processors. SMP prices cannot seem to rise above €2,000/t and have been falling since they hit that ceiling mid-June. The EU average price fell to €1,880/t last week.
The European Commission appeared to anticipate further falls as it sold 100t of SMP from intervention stocks for just €1,850/t last month.
The past week's fall has brought the value of Irish SMP back to €1,690/t, below the intervention price of €1,698/t. While no SMP has gone into intervention since May (and none from Ireland this year), the scheme may be needed again if the current trend continues.