August 4 – 2017 – Vol.
14 – Issue 8
Market Matters
As They Say in France:
Le Beurre est Mieux
No one knows butter better than the French. France holds the
distinction of both making some of the world’s best butter and
being the world’s most voracious butter consumer with annual
2015 per-capita consumption of 8 kg (17.6 lbs.). Moreover,
France’s appetite continues to grow. Between 2010 and 2015,
per capita butter consumption in France rose more than 5%,
according to the latest figures from Statistics Canada.
While France’s numbers are impressive, per-capita butter
consumption rose 12% or more over the same five-year period in
several countries where people consume an average of more
than 2 kg (4.4 lbs.) of butter each year (see chart). It appears
people other than those living in France are finally starting to
believe what the French have long known—butter really is better
and spreading it on toast or hotcakes doesn’t necessarily mean
your waistline will expand or you’ll succumb to heart disease. In
2007, only about 10% of the population of France was classified
as obese, compared with more than 20% of the U.S. population.
Yet butter consumption per capita in the United States at 2.6 kg
(5.7 lbs.) is less than one-third of what it is in France, according to
Statistics Canada’s latest figures.
Butter, the healthier choice
Consumer attitudes toward butter are changing rapidly. Several
recent studies have come out in favor of butter. One study that
analyzed nine papers and included more than 600,000 people
concluded that eating butter is not linked to a higher risk of heart
disease. The study, published in the prestigious journal PLOS One,
refutes the longstanding advice of U.S. and European health
experts that people should avoid all foods high in saturated fat
and calories, including butter.
Some studies have also shown that full-fat dairy products actually
can be useful in weight management, while still others have
shown full-fat dairy products can help ward off type 2 diabetes
due to the monounsaturated fat content in these products. In
recent years, butter has also surfaced as the winner in its long-
running battle with margarine—at least stick margarines, which
are high in artificial trans fat. Artificial trans fat, or partially
hydrogenated vegetable oil, is known to increase LDL, the artery-
clogging bad cholesterol, while decreasing HDL, known as the
good cholesterol.
Countries with some of the fastest growing
butter consumption (kg) per capita
Czech Rep
Slovakia
Lithuania
Sweden
Norway
Iceland
U.S.
0 2 4 6 8
2015 2010
Source: Statistics Canada
As consumers eagerly return to the butter case at their local
grocery store and order butter-laden entrees, appetizers, and
drinks at their local pubs and restaurants, a growing number of
food manufacturers and restaurants are changing their menus to
include butter, and some are marketing their shift to butter as a
way to provide consumers a safer alternative to trans fat.
McDonald’s, for example, has replaced margarine with butter on
its all-day breakfast menu. Cracker Barrel restaurants are
promoting breakfast dishes made with real butter, and Bob Evans
markets its Belgian waffle as made with real butter.
With butter getting a thumbs up from more scientists, it is no
wonder it is once again becoming more prevalent on the menus
of both large restaurant chains and small bistros. This has helped
create stronger demand for butter in the United States, Europe,
and elsewhere around the world. The market wasn’t prepared for
this significant increase in demand and although butter and SMP
is providing a better return over WMP, fat remains scarce. Over
the past 12 months alone, world butter prices have risen from
just shy of $3,000 (U.S.) per metric ton in August 2016 to just
over $6,000 by mid-July 2017.
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 August 4 – 2017 – Vol. 14 – Issue 8

Hoogwegt Forecast Did You Know?

Small U.S. creameries are now making
U.S. Average prices EU Average prices Oceania average prices
cultured, salted butters with 86%
$/t $/lb Trend $/t $/lb Trend $/ton $/lb Trend
butterfat using fresh cream and methods
1.985 0,90 Stable 2.020 0,92 Stable 1.920 0,87 Stable
SMP similar to those long employed in France.
FCMP/WMP 3.420 1,55 Firm 3.630 1,65 Stable 3.140 1,42 Stable

6.285 2,85 Firm 8.200 3,72 Firm 6.000 2,72 Firm

U.S. butter consumption grew 1% in the
Butter first five months of 2017, but the market
Cheddar 3.970 1,80 Stable 4.550 2,06 Stable 4.050 1,84 Stable tightened substantially due to lower
SWP 925 0,42 Weak 975 0,44 Weak product availability.

Lactose 750 0,34 Stable 890 0,40 Stable

Trendy new products like butter coffee,
U.S. prices stated ex-works / incl. expected CWT subsidy where applicable; world prices brown butter cocktails, brown butter
stated FOB main port; EUR/USD: this week 1,189 vinaigrette, and Korean honey butter
chips are being offered in restaurants
and bars in major U.S. metropolitan
areas.
World Comment
New Zealand is preparing for a strong milk season, with favorable pasture conditions and well above break-even milk prices. Farmers in the
EU as well as the US are in good shape as well, with fat prices as the main driver of profitable farm gate returns. In Europe, it will be
interesting to see how the milk output will develop in the second half of 2017. Year-on-year, growth is expected due to the steep decline in
output in H2 of 2016. Demand however, is picking up as well. With world buyers scrambling for fat and increased activity for protein, more
milk is required to supply the world’s needs. This is supported by strong export figures from all main producing regions in 2017. China
imports are on a decent level, with more expected demand to be filled for 2017 shipments. MENA imports show a diffuse picture, but in
general budgets need to be cut due to disappointing oil returns. With demand coming back to the market, buyers working through their
stocks and pipelines getting cleared, the market is moving to a more balanced situation. The big questions is when and in what way
Europe’s intervention stocks will be released to the market.

Bring it Home

World Butter Market Still Tight

India, by far, is the world’s largest producer and consumer of butter,
primarily in the form of clarified butter called ghee. According to
USDA, India is expected to produce 5.4 million metric tons of butter
products this year, and nearly all, 5.35 million, will be consumed
domestically.
The European Union is the world’s next largest producer of butter,
with 2017 production forecast at 2.65 million metric tons. USDA
estimates that about 2.15 million metric tons of this year’s EU butter
output will be consumed by member nations.
billion) to dairy producers’ milk checks, according to the National
Milk Producers Federation.
While much of the U.S. butter shortfall has been and will continue to
be filled by European suppliers, EU butter exports are now declining,
following robust 2016 shipments. Eurostat data showed EU butter
exports for the first five months of this year were 19.4% lower than
the same period in 2016—but even a drop of nearly 20% has not
caused much concern. In fact, a slowdown in EU butter exports has
likely been welcome news for European butter buyers with the
holiday demand season quickly approaching.

The United States, the third largest producer of butter, is expected to
make 890,000 metric tons in 2017, leaving a shortfall of 50,000
metric tons, according to USDA. Butter’s share of milkfat use in the
United States has grown from 16% in 2000 to 18% in 2016, and that is
having a measurable impact on markets. Recent trends in dairy
consumption in the United States suggest growing demand for
butterfat—primarily butter—has added about $2.2 billion (€1.86
When the global crude oil market recovers, however, butter demand
from oil-dependent economies might further tighten the market. For
the first five months of this year, EU exports to Saudi Arabia and
Egypt were down 57.3% and 80.7%, respectively, from a year ago. A
demand recovery in oil-rich countries could spark even higher butter
prices and thus more butter production—worsening the global glut of
skim milk powder that plagues both Europe and the United States.