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Rabobank: Butter Spreading, but Protein Failing to Lift

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There is hesitation in the market as the outlook for currency changes, production levels, and stocks fuels short-term volatility, according to the Rabobank Global Dairy Quarterly Q1 2017.

With butter prices continuing to trade at near-record levels, it’s tempting to talk of ‘market spreads’. ”The spread between the elevated butter prices and skimmed milk powder prices—which continue to fall—has never been bigger and continues to widen, although it’s nearing its climax.

The market will again look to the European Commission to support European SMP prices—and therefore global dairy prices—as it now seems all but certain that intervention buying will be needed again in 2017.

As the year progresses, Rabobank sees global butter prices remaining firm. They will be needed to maintain margins due to the persistent low value of skimmed milk, which is likely to remain weak, but stable, supported by limited stocks in Oceania and intervention buying in Europe. Cheese prices are also likely to remain stable, given the continued growth in export markets. WMP prices are also likely to remain stable for the rest of 2017, supported by limited suppliers and limited available stocks.

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