DCA Benchmarks: Milkfat market commentary week 36

The gradual upward trend in butter prices continues this week. At the same time, the gap between cream and butter prices is narrowing again.Butter prices are moving further away from the EUR €4,000 per tonne mark. Although frozen butter stocks remain high, strengthening demand for fresh butter is supporting prices. This is in line with the usual seasonal pattern at this time of year.The DCA benchmark for butter (Northwest Europe) rises by EUR €70 this week to EUR €4,140 per tonne. Market reports indicate that German retailers are reluctant to pay higher prices, resulting in difficult negotiations with producers.Several opposing forces are at work in the butter market. On the one hand, frozen butter stocks remain high. In addition, relatively high butter production is expected in the coming period, as producing butter in combination with skimmed milk powder currently provides the best milk valorisation. At the same time, demand for butter typically increases seasonally during the autumn. For now, the butter market continues to show a gradual upward trend.Cream prices had moved considerably further away from butter prices in recent weeks, but this is now starting to reverse. Cream had been trading at a premium due to good demand from the fresh segment, but this demand is weakening as summer gradually comes to an end. For the first time in five weeks, the DCA benchmark for cream moves lower, declining by EUR €185 to EUR €5,150 per tonne. With butter prices rising at the same time, the gap is narrowing from both sides. As a result, the price balance between butter and cream is being restored for the time being.