Current butter prices are unlikely to last, the head of one of Ireland’s biggest milk processors has warned.
“If someone wanted to lock in a contract at €7,000 we’ll have a celebration this evening,” Lakeland Dairies chief executive Michael Hanley quipped at the World Dairy Summit in Belfast.
Hanley said the rate at which the butter price had increased – almost trebling over just a few months – was unsustainable.
He added that this would be “important to farmers” because the price of fats has propped up their farm-gate milk prices for over a year.
‘Fats are back in fashion – they should never have gone away’
He said: “In relation to sustainable prices – at €7,000/t I don’t think that is [sustainable].
“Let’s go back 16 months to when the Brexit vote took place, butter was approximately at intervention in at around €2,300.
“And it goes up to around three times that in a period of 13-14 months. So you’d have to be very optimistic to say that that was sustainable on an ongoing basis. What I would say is that cream and fats are back in fashion – they should never have gone away.”
“We’ll see butter and cream at a higher price, but somewhere between the historic average for the last five years which was somewhere between €3,600 and €3,800. So €7,000 would be great – if someone wants to lock in a contract for the next period of time at €7,000 we’ll have a celebration this evening.
“I don’t think it will go back to the low €1,100s – I think it will go back to a sustainably higher price – so is that closer to €4,500 to €5,000 going forward? I’d like to think that.
It’ll be important to farmers; particularly over the next 12-18 months as the skimmed side of the equation is quite weak.
“There’s a lot of intervention product in store here in Europe so butter has really carried the milk price for the last 12-18 months and indeed continues to do that going forward.”
Different channels
Hanley explained that there were “a lot of opportunities” for creams and fats to add to taste in product development. The firm already manufactures a wide range of products for foodservice.
Hanley added: “From a butter fat point of view we have different channels. We are a shareholder or stakeholder in the Ornua business so a lot of our butter thankfully finishes up in the Kerrygold German market.
“On the UHT side of the business we also have customers on cream products both in the UK, the Far East and China. We also break butter into mini portions – 7g, 250g – and again there’s a UK market that operates for that.”
