Global food prices near three-year high driven by record butter prices

02-Aug-2017 - Last updated on 07-Aug-2017 at 10:03 GMT

Butter prices have a hit a record high in Europe while skimmed milk powder demand slackens. ©iStock/Eplisterra

Global food prices have risen for the third month in a row, hitting a 31-month high partly led by higher prices for butter and cheese, according to the FAO food price index compiled by the UN.

The FAO Dairy Price Index increased 3.6% in July compared to the previous month, registering a 52.2% increase in value compared to June 2016.

“Despite this latest increase, the index is still 21% below its peak reached in February 2014,” the FAO said.

Butter prices reach new heights

Tighter export availability has pushed butter prices to a new high in July 2017, widening the spread between butter quotations and other dairy products further, the FAO said.

Global butter prices increased $900 to $1,300 per ton in June this year and reached a record high of $6,100 per ton in Europe, with prices continuing to surge through July, according to a USDEC (US Dairy Export Council) global market analysis.

Oceania saw the largest price increase (104%) in butter, more than doubling its price per ton compared to the same period last year.

“Record butter prices are rationing the existing supply among the buyers who can afford to pay the most,” USDEC said.

“In the case of Europe and the United States, that’s generally the domestic market, leaving less available for export.”

With record butter prices and falling WMP (whole milk powder) prices, more butter production is expected for the second half of the year in the US, Europe, and Oceania, USDEC predicted.

Strengthening global cheese demand

Exports of cheese from major suppliers remained solid with a boost in buying from South Korea (+11% for the year), China (+25%), and Southeast Asia (+12%).

Russian cheese imports have also increased by 50% compared to last year despite a ban on Western agricultural products, which was extended until December 2018.

“While strong buying activity from Asian importers also underpinned cheese and WMP quotations, SMP (skimmed milk powder) prices were weighed down by slack demand and prospects of larger releases from the intervention stocks in the EU,” the FAO said.

Reduced demand for SMP has led to a surplus of approximately 352,000 tons sitting in EU stores, limiting SMP price increases.

As a result, markets including Australia and Argentina have reduced their imports of SMP by 42% and 72% respectively compared to the same period last year.