The gap between EU and Oceania butter prices has grown to its widest in more than a decade, according to analysis by the Agriculture and Horticulture Development Board (AHDB).
USDA data showed EU butter prices averaged $6,600/t in August; some $1,925 higher than the average for Oceania.
It makes it the highest premium recorded since the middle of 2007.
The EU reached significantly higher butter prices than Oceania in the 2017 summer, however, the difference had virtually disappeared by the autumn as EU buyers stepped away from the market.
Rising prices
An AHDB spokesman said: “This year, butter prices increased across both regions in the spring and early summer. In the EU, prices rose further and then held up better, partly because of the hot, dry weather conditions and subsequent concern over milk volumes.
With the immediate concern over volumes now reduced, commodity prices have reportedly started to come under downward pressure in the EU, while Oceania butter prices have been reducing since June.
As a globally-traded commodity, higher prices in one part of the world attract interest from other regions.
“We have already seen this with Fonterra’s offer to sell butter into the EU. As a result, butter prices in the EU and Oceania will eventually come back together,” the analyst explained.
“How fast the EU market aligns to world price levels will depend on the knock-on impact the summer weather has on EU milk supplies later in the year.”
