Joe Collins, MD of Ornua trading and ingredients, warns that the spike in spot butter prices in recent months carries demand and brand risks within the supply chain and may not translate into long-term higher milk prices at the farm gate due to low skim milk powder (SMP) returns prices.
He says SMP prices have remained depressed in the last 12 months with prices just 15% above the intervention floor. This product price mismatch has discouraged processors from making additional butter as the cent-per-litre returns are affected, with strong spot butter returns being negated by lower SMP returns. Milk prices tend to reflect the wider product portfolio and forward contract mix.
Collins adds that while the retail price of butter has increased, it only partially reflects the spot price increases. He says butter brand strategies are being affected and there could be long-term brand damage with the potential for reduced demand as consumers trade down to own-label, lower-quality brands or margarine.
ADVERTISEMENT
Food ingredient customers including bakeries see butter costing 60%-80% more than budgeted, with some now looking to dairy substitutes.
The market would welcome a rebalancing of fat and SMP protein values as this would be sustainable for all parties.
Register for free to read this story and our free stories.
This content is available to digital subscribers and loyalty code users only. Sign in to your account, use the code or subscribe to get unlimited access.
The reader loyalty code gives you full access to the site from when you enter it until the following Wednesday at 9pm. Find your unique code on the back page of Irish Country Living every week.
CODE ACCEPTED
You have full access to the site until next Wednesday at 9pm.
CODE NOT VALID
Please try again or contact support.
Joe Collins, MD of Ornua trading and ingredients, warns that the spike in spot butter prices in recent months carries demand and brand risks within the supply chain and may not translate into long-term higher milk prices at the farm gate due to low skim milk powder (SMP) returns prices.
He says SMP prices have remained depressed in the last 12 months with prices just 15% above the intervention floor. This product price mismatch has discouraged processors from making additional butter as the cent-per-litre returns are affected, with strong spot butter returns being negated by lower SMP returns. Milk prices tend to reflect the wider product portfolio and forward contract mix.
Collins adds that while the retail price of butter has increased, it only partially reflects the spot price increases. He says butter brand strategies are being affected and there could be long-term brand damage with the potential for reduced demand as consumers trade down to own-label, lower-quality brands or margarine.
Food ingredient customers including bakeries see butter costing 60%-80% more than budgeted, with some now looking to dairy substitutes.
The market would welcome a rebalancing of fat and SMP protein values as this would be sustainable for all parties.
If you would like to speak to a member of our team, please call us on 01-4199525.
Link sent to your email address
We have sent an email to your address. Please click on the link in this email to reset your password. If you can't find it in your inbox, please check your spam folder. If you can't find the email, please call us on 01-4199525.
ENTER YOUR LOYALTY CODE:
The reader loyalty code gives you full access to the site from when you enter it until the following Wednesday at 9pm. Find your unique code on the back page of Irish Country Living every week.
SHARING OPTIONS