Little butter

In summer of 2017 the growth of prices of butter production in Russia amounted to 21-25% compared to the same period of 2016. The growth of prices for butter continued in the United States, Europe and Oceania. According to the results of Global Dairy Trade auction on September 5, the growth of prices for butter amounted to 3.8% - the cost of 1 kilogram exceeded 344 rubles. At the site of Trigona Dairy Trade at the end of August the price of butter was equal to 6.8 Euro / kg or 473.43 rubles per kg.

In Russia the growth of prices for butter is aggravated by restrictions on imports and by reduced purchasing power of the population, note analysts surveyed by The DairyNews. By the way, according to the materials of the Russian Dairy Research Center in 2016 the production of butter in Russia decreased by 4.4%, while production of spreads increased by more than 8%.

"The reason is primarily the higher prices of raw materials. Over the summer, prices for milk have risen 5-6 times. In addition to raw materials transportation costs have also increased. As for the forecast for the butter market, it seems to me, the prices can’t grow any more. I think that price growth will slow down soon," - said Vladimir Frolov, Deputy Director of Tbilisi butter and cheese factory in an interview with The DairyNews.

The Chairman of the Board GC "Alantal" Alexander Nikitin, expressed the opinion that the price of milk fat in the world and in Russia increased significantly, and the price of milk protein, on the contrary, have dropped significantly. "This trend, in my opinion, is a long-term trend. This situation can last for a very long time. It is very unpredictable when everything will fall into place, and milk fat and milk protein will become cheap again. One can compare this with a thrown coin, you never know what face it will fall on," said Alexander Nikitin.

According to analyst of INFAGRO Maxim Fasteev, the reasons for the "butter rush" in the EU were quite clearly explained in Rabobank.

"Rabobank has noted the limited supply of milk and the lack of demand for skimmed milk powder – the decision about the production of butter does not depend only on the price of butter. It is also directly related to the prospects of the market of skimmed milk powder and the prices of cheese and whey. They also mentioned the focus of the European processors on cheese and the fact that the import of butter is hampered by import duties and taste difference between "milk" (Lactic) butter, which is popular in Europe, and sweet butter used in other markets" - identified Maxim Fasteev on the official page in Facebook.

According to Mikhail Lyasko, General Director of LLC "Arla foods", the situation with the high prices for butter in Russia will continue in the autumn-winter period.

"Of course, the price increase of butter is related to the record price growth of fat in the composition of dairy raw materials on the world market. In Russia the situation is aggravated by the known restrictions on imports. In this sense, suppliers from countries that are not under the restrictions (Argentina, Uruguay, New Zealand, etc.) are in the monopolistic situation", - said the expert.

As Kevin Bellamy senior analyst of the dairy market, Rabobank reported in his comments of The DairyNews, there are several reasons for the increase of price for butter. First and foremost, there is a significant increase in demand for this product, and we can observe it both in Europe and in the United States.

People want to consume more natural product which butter fully complies with the, the expert said Rabobank. "For 30 years people considered butter as a source of heart diseases because it contained cholesterol, but recently a number of scientists questioned the link, so now people do not see the harm in butter," believed Kevin Bellamy.
He reminded that in 2016 across Europe the farmers sought to increase milk production, but the price got reduced ultimately to such an extent that most of them were forced to leave the market.

"The fact that now when milk prices are rising, producers have to make a choice to invest in the production of butter or in cheese production worsens the situation. Most farmers make a choice in favor of cheese, because they think it is more profitable. In the USA the prices are also increasing, but they are not still the same as in Europe. If we speak about forecasts, such situation will definitely last until next year," concluded Kevin Bellamy.

In August this year the wholesale prices of butter in Europe have almost doubled due to the sharp growth in global demand and compared to last year retail prices in June went up by almost 20%. According to experts, the lack of butter will be a real threat for the market in Europe in the late autumn, when the demand for butter will grow even more before the Christmas holidays.

Meanwhile, in Russia the price of raw milk remains higher than in Europe (according to the Russian Dairy Research Center the price for milk in the EU in July this year was just 1.43% lower compared to Dairy Index RDRC), the growth of prices on the EU market in the future may strengthen the competitiveness of Russian products, but the demand in the domestic market is still unstable.

Read full article in Russian on DairyNews.ru