European butter prices are forecast to rise this year, driven by changing weather in producing region and political uncertainty.

The rise predicted for the latter half of 2019 follows a recovery in European butter prices in the wake of shortages and unprecedented demand in 2017.

According to HIS Markit’s Agribusiness Intelligence, for the first time since September 2016, European butter prices fell to €3,925/tonne in mid-July.

2017 saw an explosion in demand for butter in line with changing commentary about the healthy nature of fats in food.

Demand has continued to climb ever since, and in the beginning of 2019 exports in January to March exceeded 531,000 tonnes for the first time in a decade.

The export value reached €2.35 billion ($2.65 bn), up 6% on the same period in 2018.

During this period, India emerged as the second-largest butter exporter, overtaking Russian-tied Belarus, with shipments surging 300% to 22,000 tonnes.

Belarusian exports increased by a comparatively marginal 6.3% to 20,000 tonnes, with around 77% of the total destined exclusively for main market Russia, while the rest travelled to other EAEU countries.

US exports remained flat at around 9,200 tonnes on 2018’s 9,700 tonnes, while Ukrainian deliveries fell back by 35% to

5,900 tonnes on unfavourable weather conditions leading to low milk availability. EU butter exports rose 2.3%, which is a low level considering the bloc’s butterfat competitiveness on the global arena. By comparison, volumes in Q1 2018 surged by 10%.

Countries that led the increase in the period were the top three exporters the Netherlands (up 6%), Ireland (up 5%) and Belgium (up 9%). 

he bloc’s other largest exporters suffered volume decreases; among them Germany (-9.3%), France (-2%) and Poland (-28%).

Surprisingly, even despite the uncertainty surrounding Brexit, the UK managed to export its largest volume of butter in the last five years, reaching 21,600 tonnes.

Together with Denmark, Finland and Italy, the countries managed to keep EU butter deliveries afloat.

“The EU has now passed the peak period and the butter price trend observed in Europe at the moment is flat to decreasing, as the continent has now entered its seasonal lull,” said Jana Sutenko, Analyst at IHS Markit Agribusiness Intelligence.

“The hot weather we’ve witnessed in Europe this summer seems to have passed with no country – so far – posting any significant milk losses as a result.

“That said, prices are indeed expected to rise towards Q4, but the extent of the increase is dependent not only on the weather situation in other producing regions, but also the outcomes of Brexit and other political tensions in the global arena.

“Production in New Zealand, for instance, is set to remain stable or slightly increase in the 2019/20 milk seasons but these prices will continue to be shaped by demand from main import markets – especially Asia. Similarly, the weather hampered milk collections in Australia this season which complicated global market conditions.”