Irish butter expands massively despite poor international demand
Irish butter output has expanded massively this year despite poor international demand and collapsing prices.
Butter production has increased by 13pc to 31,000 tonnes to the end of May, the latest figures from the CSO show.
The higher output of butter comes as global demand continues to slide, with wholesale prices back 40pc in the last 13 months – dropping from €6,000/tonne in June last year to €3,630/tonne at the moment.
Traders blame an overhang of supplies for the poor demand. Some reports also link the lack of demand to reformulation by butter buyers such as pastry and cake manufacturers.
Traders maintain that companies changed their recipes to include less butter when prices were high, and with these changes now made the reduction in butter demand could be long term.
The latest Dutch auction price for butter was €3,630/tonne. This is the lowest price recorded since autumn 2016 when butter hit a high of €6,960/tonne. Dutch wholesale prices were still averaging over €6,000/tonne in June 2018.
The latest reports from Britain show prices at similar levels to Holland, at €3,630/tonne (£3,240/tonne). This is back from an average of €3,850/tonne (£3,440/tonne) in May, and €5,745/tonne (£5,130/tonne) in June 2018.
Butter prices dipped under €4,000/tonne at the end of May, as reduced international demand for dairy fats and increased output hit the market.
Farm-gate milk prices are likely to come under downward pressure if the market for butter does not improve.
The extent of the downturn in butter demand globally was illustrated in the latest GDT auction.
Although the overall index was back just 0.4pc, the butter index was down 4.8pc to €3,860/tonne (US$4,339/tonne). The index for butter milk powder (BMP) took an even more dramatic hit, dropping 11.9pc to €2,250/tonne (US$2,500/tonne).
In contrast however, the strong market for dairy proteins resulted in the SMP index rising by 3.2pc to €2,190/tonne (US$2,430/tonne). Whole milk powder (WMP) was unchanged at €2,675/tonne (US$2,969/tonne).
Meanwhile, milk intakes by Irish creameries and dairies were up almost 11pc in May this year compared to 2018, according to the latest CSO data.
Supplies topped 1.1bn litres for the month, up around 110m litres from the 993m litres supplied in May 2018.
The CSO figures also show a sharp increase in milk output during the first five months of the year, with production up 11.5pc.
Total production from the start of January to the end of May increased by more than 330m litres; rising from 2.9bn litres in 2018 to 3.23bn litres this year.
The supply data confirms that Ireland will now comfortably exceed the 8bn litre threshold for 2019.
In 2018 total production from the national dairy herd exceeded 7.5bn litres – the 50pc growth target set under Food Harvest 2020.
However, with additional cow numbers taking the national dairy herd to over 1.45m head, and strong grass growing conditions since spring, industry sources maintain that total milk production this year could top 8.2bn litres.
For Stories Like This and More
Download the Free Farming Independent App