Bakers face higher prices for butter after a surprise rally on global commodity markets.
Between 15 April and 24 May the price of butter futures to October 2017 on the European Energy Exchange (EEX) jumped by £265 per tonne to an average of £2,292 – an increase of 13%.
The effects of low milk prices and a cold, wet spring across Europe have combined to push butter prices upwards. The news leaves food companies exposed to the risk of rising raw material costs, which could hit their profits further if they don’t take action now and lock into a fixed price deal.
Ian Thomas, managing director of dairy trader Greenfields Ingredients, said: “Food manufacturers have become accustomed to the idea that there is too much milk and that prices will continue to fall. Until recently, that has been the case.
“However, milk is a natural product and its production is particularly subject to climatic conditions and, when coupled with the current commercial pressures, prices can rise sharply. As such it’s always wise to prepare for bumps in the road when prices might shoot up, just as they have in the past month or so. …Prices have risen much earlier than expected.”