January 24, 2022

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Butter price hike.  Demand is greater than supply

Butter price hike. Demand is greater than supply

The price of a cube of butter on store shelves is currently 7-8 PLN. In annual terms, butter increased 34.1 percent. – Analyst Giulietta Brismont of Hiper-Com Poland.

What affected the price increase? According to Interia, Marcin Hydzik, Chairman of the Board of Directors of the Polish Association of Milk Processors, the main factor affecting butter prices in the world market is lower production compared to previous years – especially in the USA and Europe, which are the main producers and exporters of butter in the world.

Available raw materials were directed to the production of other dairy products. in addition to Large producers and exporters from Europe recorded a decrease in milk purchases Namely, Germany, France and the Netherlands, which also translated into a decrease in the supply of butter from the European Union on the world market. There was also some in international trade logistical problems Related to the lack of containers, sometimes also shipping and Some deliveries were not delivered or delayed. In other words, demand exceeded supply and that was reflected in prices, Hydzik explains.

He also adds, when it comes to the Polish butter market, wholesale prices for packaged butter have already increased by 43.58 percent since the beginning of the year. Although compared to the previous year, in the first nine months of 2021 there was an increase in the amount of milk purchased in our country, it was only an increase of 0.3%.

On the other hand, butter production – as the head of ZPPM explains – decreased by 5.56 percent during the first three quarters. This was because – as indicated by the statistics – more milk compared to the previous year was directed mainly to cheese production, which increased 3.02 percent compared to the previous year. And to some extent for the production of fermented dairy products.

– For the same reason, from January to September 2021, Polish producers exported nearly 20 percent. Butter is lower than in the same period of 2020. However, attractive prices on world markets and weak zlotys caused the value of Polish butter exports expressed in zlotys to decline by only 5.69 percent. – Hydzik says.

At the end of November this year. The average price of butter in the European Union was $5,607 per ton. This means a decrease of about 1.5%. Compared to the price mentioned two weeks ago – refers to the head of the ZPPM. In the same period, the price of butter produced in New Zealand increased to $ 5,988 per ton and the price of American butter to $ 4,387 per ton.

– The decrease in average prices in the EU is mainly due to lower demand from buyers who They are in no hurry to conclude supply contracts for the first quarter of 2022. In addition, lower prices for cream have also contributed to lower butter prices in the European Union. Some analysts point out that EU prices may have already peaked and the downward trend may continue even in the first quarter of 2022. At the same time, it seems that butter prices in the United States will not fall, on the contrary, the supply of this product has decreased in recent months, and both domestic and foreign demand remains strong. At the same time, historically high stocks of American butter have fallen significantly. Prices of Oceania butter are rising mainly due to the relatively high prices in Europe and problems with US supplies to importing countries. Hydzik believes that this trend is likely to continue as long as milk production in this region does not increase.

In his opinion, although the average price of butter in the European Union, as analysts predicted, is not expected to rise, so far there are no indications that wholesale prices, especially retail prices in Poland, will follow European trends. – The decline in supply and the constant export demand for Polish dairy products, which was also caused by the weakening of the zloty, the rise in purchase prices for milk and general inflation, do not leave any illusions – it is unlikely that butter prices will fall on store shelves in Poland in the near future Especially in the pre-holiday season Hydzik’s predictions.

The Interia hub also comments on the risks of speculation in the market. This was the case in 2017, when prices for butter rose sharply, which could not be justified by a high increase in demand.

There is a general perception that the supply of butter is low, but the demand in the world market is rather weak. Buyers do not rush to offers as eagerly as before, because the prices, in their opinion, are too high, and therefore they are in no hurry to conclude supply contracts in the first quarter of 2022, waiting for a reduction. Considering that, It is unlikely that producers will hoard it to raise the price. Butter quotations on futures exchanges, for example at the New Zealand GDT, indicate that prices will fall slowly, so in this case it will be risky for a speculative game to increase prices – sums up the head of ZPPM.

Dominica Petrzyk

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