What goes up must come down, and so goes the story of butter prices this week.

After peaking at €8,120/t two weeks ago, European butter prices now stand at €7,620/t – a drop of €500/t. It’s a significant reduction, but the question is what happens from here on? Some speculators are suggesting that more and steeper reductions are likely.

The top price for butter was never going to last as it was so out of kilter with the medium-term butter price.

There were price reductions for all other commodities this week, with the most significant being for whole milk powder (WMP), which fell by €140/t to €4,240/t.

Both cheese and skim milk powder (SMP) fell by €25/t. The falls in price this week are in contrast to the Global Dairy Trade (GDT) auction of last week, which saw the index increase by an average of 1.2%.

Whole milk powder

There were gains for WMP, up 3%, and cheddar cheese, up 3.8%, while butter fell by 1.4% and SMP fell by 0.6%.

There is talk that higher than expected milk deliveries in Germany and France are easing pressure on supply and this is why prices, particularly futures prices are easing.

Major Bluetongue disease outbreaks have been limiting milk supply in Europe, but as we move into the winter that risk abates.

The futures market is under pressure, especially for butter, but for Irish farmers the prices don’t need to remain at €8,000/t to get a good milk price.

It’s interesting to note that Fonterra have revised upwards their milk price forecast for the season, by 12.5% since May of this year.