Butter Market Firms as Feed Stress Tightens Southern Milk Supply
EU butter prices firm as southern German milk supply faces feed shortages. Analysis of Kempten quotes, Kiel milk value, EU benchmarks and short-term outlook.
Prices
The Kempten exchange confirms a firmer direction in the German cash market. Food-grade milk powder (MMP) was quoted at EUR 3,250–3,330 per tonne, up EUR 50–60 versus the previous week, while moulded butter rose at the upper end to EUR 4.35–5.00 per kilogram; bulk (loose) butter remained unchanged.
From these quotations, the ife Institute calculates a Kiel raw material value for September of 42.6 cents per kilogram, up 3.9 cents from August and back above 40 cents for the first time in eleven months. The exchange’s milk value stands at 44.4 cents for October, almost flat week-on-week, with around 46 cents indicated for Q1 2027, reflecting modest forward premiums driven mainly by powder gains rather than butter alone.
At the broader EU level, Commission reference data show average butter prices around EUR 4,254 per tonne (EUR 425.4 per 100 kg) for the week of 21–27 September 2026, about 2.2% higher than the prior week and still roughly 30% below year-ago levels, highlighting a market that has stabilised after sharp devaluation but remains historically moderate.
On the physical trade side, a recent FCA quotation for fresh 82% butter of Polish origin in Grudziądz stands at EUR 3.52 per kilogram with unchanged levels versus the previous update on 21 September 2026, after having firmed from EUR 3.40 per kilogram earlier in August. This pattern of gentle appreciation, yet well below last year’s peaks, is consistent with the official EU averages.
Supply & Demand
Milk deliveries are seasonally declining across the EU, and German market participants stress that the outlook now hinges heavily on feed availability. In southern regions, forage supply is clearly strained: September brought only 40 litres of rain per square metre nationwide, 34% less than normal, with Baden-Württemberg receiving merely 27% of its usual precipitation according to the national weather service.
The feed situation is tightest in southern Germany. Hay prices averaged EUR 143 per tonne nationwide in September, the highest level since 2019, and exceeded EUR 190 per tonne in Hesse and Bavaria. At the same time, both grain and silage maize yields are disappointing, with reports of noticeable harvest shortfalls particularly in southern areas. These factors are likely to cap milk production growth through Q4 and into early 2027, even as farm-gate milk prices recover somewhat.
Demand-side, retail and food-service butter off-take remains relatively steady but price-sensitive after the inflation shock of previous years. Recent EU data show butter still trading significantly below 2025 levels, but small weekly gains since August and a more constructive tone on the German cash market indicate that buyers are increasingly prepared to accept modestly higher prices to secure Q4 coverage.
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Fundamentals & Weather
The key fundamental shift lies on the raw material side. The rise in the Kiel raw material value back above 40 cents per kilogram signals an improved valuation of milk components, driven primarily by stronger milk powder prices that more than offset prior butter weakness. This dynamic also explains why the forward milk value for Q1 2027 shows only a small premium: powder is pulling the complex higher, but butter is no longer the main driver.
Weather remains a critical risk. The exceptionally dry September in southern Germany has already tightened forage, pushing hay and other feed prices to multi‑year highs and raising concerns about cow condition and winter feeding costs. Unless autumn precipitation normalises quickly, farmers may curb concentrate use or accelerate culling, both of which would constrain milk output and thus cream availability for butter production.
Across the EU, official butter price series from the Milk Market Observatory confirm a gradual firming trend since early August, though levels remain well below the highs of 2024–2025. The combination of constrained feed, lacklustre maize yields and slowly improving demand suggests that the downside for butter prices is increasingly limited, while significant rallies would still require a stronger upswing in consumption or additional supply shocks.
Outlook & Trading Recommendations
- Short-term (next 4–6 weeks): Expect a firm to slightly higher butter market in the EU, with German quotations underpinned by tight feed and falling milk deliveries. Volatility should remain moderate as powder, rather than butter, leads the complex.
- Dairy buyers: Consider extending coverage modestly into Q1 2027 while prices remain well below last year’s levels, focusing on structured products and origin diversification. Avoid over‑hedging, as demand-side risks and high stocks in some segments still cap upside.
- Producers and cooperatives: Use the firmer tone to lock in margins where possible, especially in regions facing high feed costs. Monitor forage and maize developments closely; any further deterioration could justify firmer asking prices for bulk butter and cream.
- Traders: Regional spreads (e.g., high‑priced southern Germany vs. more competitive Poland) offer opportunities for arbitrage, but liquidity remains patchy. Pay attention to butter futures and milk value indicators for signals of whether powder-led support will translate into a broader fat rally.