Butter continues to defy market expectations, with prices holding firm right across Europe in the last week, despite last week’s slight fall (-0.5%) in the benchmark GDT index.

European spot prices for butter this week have held steady at €4,850/t, which is a very strong price when compared over a five-year timeline.

On futures markets, which provide a good barometer of buyer sentiment, butter prices out to June 2018 continue to trade in the region of €4,800/t, with June prices peaking last week at close to €5,200/t.

When taken as a whole, market sentiment for butter at this moment in time is one of tight supplies and high prices.

While milk production in some of the big producing regions of Europe remains strong, buyers are wary of being caught short for supply.

Last year’s spike in butter prices to more than €7,000/t is still fresh in the memory.

SMP

The great contrast of dairy markets right now is the complete devaluation of skimmed milk powder (SMP), which is of course the by-product of making butter.

Once again, SMP prices have found a new floor this week, with European spot prices for SMP dropping to a new record low of €1,320/t.

Until the near 400,000t of SMP sitting in EU intervention starts to move, dairy market dynamics for butter and SMP will remain unbalanced.