September 4, 2017

The World Still Can’t Get Enough Fat

 |  By: Know Your Market

Even after a 7 ¼-cent fallout in butter prices last Friday, butter prices remain north of $2.50 per pound and at levels over the course of the last two months that are higher than any prices witnessed since the fall of 2015.

To the contrary, the 3 cent rise in cheese prices on Friday still leave the cheese markets at some of the lowest levels in the last few years.

So what gives?

It has everything to do with demand.

While protein has had to work hard to hold its own, the world it seems cannot get enough fat. Regarding protein, the EU’s intervention price for skim milk powder has remained as the safety net for global prices. And even as of late, EU countries have continued to contribute to the intervention program.

Domestically, nonfat dry milk has continued to hold the 85 cent per pound line for the entire summer. This situation has only been worsened by Canada’s new pricing system that has allowed them to be the low-cost seller of skim milk powder in the world market. That’s an issue that is likely to be addressed in ongoing trade negotiations.

Regarding fat, consumers continue to trend away from the low-fat, no-fat diets toward higher fat products, a trend that has been confirmed in nearly every product category and has substantiated the fact that butterfat is scarce. Year-over-year prices have risen nearly 100% in some parts of the world.