Butter prices are in turmoil, according to June’s Bulk Dairy Market Report from Staple Dairy Products.

Prices in the UK have risen by 40% since January 2007, according to the report. On butter and milk powders it says: "Supplies remain scarce and prices remain firm - and getting firmer as EU milk production starts its seasonal decline into the summer and early autumn trough."

Dairy farmers have continued to exit the industry in large numbers over the past three years, which is leading to uncertainty over milk availability, especially in the coming autumn and winter periods.

Other reasons for the price increases include demand from developing countries, while Australian exporters are struggling to recover from drought. Butter subsidies have also been withdrawn and poor climactic conditions in the UK are a factor.

Intervention stocks of butter are now at zero, which effectively makes the EU market over 80,000 tonnes short in the second half of 2007 compared to 2006.

"Markets look uncertain going forward for both dairy fats and proteins. Whey powder markets, while calming down recently, remain nervous, as does Whey Protein Concentrate (WPC), caseinate and indeed any form of dairy protein."

The report continues: "Demand is outstripping supply by some way - world demand for dairy products in total is growing by around 2.5% but production is growing by 1% only."

See [http://www.stapledairy.co.uk] for more information.