DCA Benchmarks: Milkfat commentary week 26

Pressure on butter prices continues this week as demand remains persistently weak. In contrast, cream demand has strengthened due to the hot weather, pushing prices higher. As a result, the milk fat market is showing diverging trends.The butter market continues to be characterised by ample stocks and subdued demand. Against this backdrop, further price declines come as little surprise. The DCA benchmark for Butter (Northwest Europe) falls by €75 this week to €3,600 per tonne. Market participants increasingly believe that prices are approaching a floor, although that perceived floor has shifted slightly lower from week to week. Buyers seeking third-quarter deliveries are still required to pay a small premium. Trading activity remains limited.One of the key questions facing the market is the size of the remaining unsold butter stocks. The relatively large volumes of older product being offered suggest that inventories remain substantial. This view is also supported by warehouse operators, although without providing specific figures. Butter demand typically strengthens during the second half of the year, which will be necessary to help restore balance to the market.CreamMeanwhile, cream prices are once again pulling away from butter. The DCA benchmark for Cream (Northwest Europe) rises by €110 this week to €3,810 per tonne. The increase is driven by a decline in milk production of several percentage points as a result of the hot weather. At the same time, higher temperatures have boosted cream demand, although some traders had expected an even stronger market reaction. The anhydrous milk fat (AMF) market continues to move broadly in line with butter. The DCA benchmark for AMF declines by €100 this week to €4,400 per tonne.