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Sunday 22 April 2018

Butter prices still buoyant but have peaked for 2018

Rising butter prices are already driving some consumers towards cheaper fat sources
Rising butter prices are already driving some consumers towards cheaper fat sources
Aurivo CEO Aaron Forde
Louise Hogan

Louise Hogan

Butter prices have peaked for this year, but demand still remains strong.

That's the verdict from Aurivo CEO Aaron Forde who said prices have eased in the last couple of weeks, with the majority of Christmas stocks now ordered.

"We are now into a different era for butter prices," he said. "Butter has passed the peak for now."

Butter prices peaked at €6,900 in Europe this autumn but have fallen back to around €5,400.

"Consumption was going to be affected if it continued at those levels - there was some evidence of that in Germany," said Mr Forde. The Aurivo CEO, who is also chairman of Ornua, said GM-free butter was a segment of the marketplace but it does not appear to be attracting a premium over Kerrygold.

He said the possibility of producing GM-free products was "under active consideration by everyone in Dairy Ireland".

However, he said there does not appear to be a "strong premium" for it and the extra costs of imported organic feed would have to be balanced against a potential premium for GM-free products.

After launching Aurivo's third fixed milk price scheme, Mr Forde said Aurivo felt it was delivering a "strong" scheme for suppliers who choose to participate with a guaranteed 33.5c/l including VAT on up to 10pc of their monthly supply for 36 months.

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Glanbia has offered a five-year fixed milk and feed deal of 31c/l including VAT, with a €30/t loyalty bonus on feed that must be purchased from Glanbia.

Mr Forde said "interest has been very good" in its scheme and Aurivo hoped a good portion of suppliers will take the chance to hedge against volatility.

"We've had a good spell over the last six months or more but the volatility has not gone away," he warned.

Aurivo expects farmers to fix up to 10pc of their monthly supply.

It had discussed adding a feed element to the scheme but decided against it.

Aurivo is urging farmers to buy from the co-op or from merchants with strong traceability records.

Aurivo expects its milk pool to increase by 7-8pc this year to around 400 million litres.

Meanwhile, IFA dairy chair Sean O'Leary has said the option of fixing prices for a portion of their milk production is a valuable protection for dairy farmers against price volatility.

He said farmers must examine the schemes being offered and question if they are "comfortable with the price on offer, relative to current market prices and their own production costs".


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