DCA Benchmarks: Milkfat commentary week 23

After several weeks of relative stability, milk fat prices are moving lower again. The butter market continues to be weighed down by ample inventories that are being offered at lower prices. This is also dragging cream prices down.The DCA butter benchmark for Northwest Europe declines by €140 this week to €3,815 per tonne, the lowest level since late April. Buying interest remains limited, while inventories have been abundant for an extended period.Price pressure is being reinforced by competitively priced product from Eastern Europe. Market participants there are attempting to clear older stocks at prices reportedly around €3,500 per tonne. This is putting downward pressure on butter prices across Europe. For now, there are few signs that inventories will tighten soon. Although milk production volumes are expected to decline seasonally in the coming months, stronger consumption is not anticipated until the fourth quarter.In the wake of the butter market, cream prices are also moving lower. After four consecutive increases, the DCA cream benchmark for Northwest Europe falls by €375 this week to €3,960 per tonne. At these price levels, it is attractive for processors to purchase cream on the spot market and convert it into butter. However, buying interest remains muted, as butter inventories are already substantial and there is little expectation of a near-term recovery in prices. The price of AMF remains relatively stable at €4,925 per tonne. Nevertheless, market participants expect that the ongoing weakness in butter and cream prices will eventually spill over into the AMF market as well.