EU and UK butter prices converge

Tuesday, 19 November 2019

By Kat Jack

UK wholesale butter prices have been at a discount to EU prices since February 2019, when compared in sterling terms. This discount had been in the range of £100-£300/tonne. However, these two prices converged in September and have remained close; the October UK price was only £34/tonne below the EU price.

Butter prices have generally been trending downwards since the middle of 2018. For most of that time, the UK price declined at a faster pace than the EU, creating a divergence in the prices. In September, UK butter prices lifted, driven by a peak in cream demand, bringing them back in line with EU prices.

Currency will have played a part, as the pound strengthened in September and October, reducing the value of euro prices once converted. The EU wholesale butter price increased by 1% in euro terms between August and October, but in sterling terms the price fell 3%. This helped bring the EU butter price closer in line to the UK price when measured in sterling terms.

Good product availability in the UK may also have contributed to the price differential. UK milk production was strong through winter 2018 and most of 2019, growing ahead of most EU countries. With this, butter production increased; for the 12 months Sep18-Aug19, UK butter production was up 20% on the previous 12 months, while overall EU production was only up 3%. Additionally, Brexit uncertainty may have played a part, requiring price discounts from UK manufacturers to persuade nervous buyers on the continent.

Katherine Jack

Analyst - Dairy

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