Butter Market Under Pressure Despite Firming Milk and Powder Values

Butter prices are softening at exchanges and in physical trading, even as milk and skimmed milk powder markets firm. Rising raw milk value in Germany and higher powder returns contrast with weaker butter quotations, signaling a temporary loss of pricing power for fat and a more cautious demand environment. The current market is being shaped by seasonally low but stabilising milk deliveries, diverging product dynamics between fats and powders, and a mixed international picture from the latest Global Dairy Trade auction. In Germany, milk intake has dipped below last year, while France continues to see a more pronounced production deficit. At the same time, the Kiel raw milk value climbed strongly in October on the back of higher powder prices, whereas butter contributed only marginally. Internationally, the latest GDT auction showed solid gains for whole and skimmed milk powder but an almost 5% drop in butter and anhydrous milk fat, underlining global headwinds for milk fat prices.

Prices

At the European derivatives level, butter has recently eased, in contrast to rising skimmed milk powder quotes. This pattern is mirrored on the physical German market, where the Kempten butter and cheese exchange reported weaker prices for loose butter, while skimmed milk powder moved higher.

On the spot side, a key fresh butter quotation (82% fat, FCA Grudziądz, PL) stands at 3.85 EUR/kg FCA as of 9 November 2026, up from 3.65 EUR/kg in late October, indicating some recovery in recent days despite earlier softness. However, this firming is modest compared with the stronger percentage gains seen in powder markets and the underlying milk value.

Supply & Demand

In Germany, milk deliveries to dairies fell by 0.6% in week 43 versus the previous week and were 0.2% below the same week last year, indicating a still tight but no longer shrinking supply base. Analysts expect that the seasonal low point in milk production has now been reached, with volumes likely to edge higher in the coming weeks.

France shows a more clearly constrained supply situation, with milk collections still significantly below last year and the year-on-year deficit recently widening to 2.6%. This structural shortfall supports medium‑term milk and powder prices but has not prevented butter from softening in the short term, suggesting that current pressure on fat values is more demand‑driven than purely supply‑led.

Fundamentals

The Kiel raw milk value rose sharply in October 2026, gaining 3.9 cents or 9.2% month‑on‑month from 42.6 to 46.5 cents per kilogram of milk. This was the fourth consecutive monthly increase and is now 7.4 cents or 18.9% above October 2025 levels, highlighting a much improved milk price environment. The increase is driven predominantly by higher skimmed milk powder prices rather than butter.

Average skimmed milk powder prices climbed by 10.6% or 336 EUR to 3,494 EUR/t, while butter increased by only 2.3% or 100 EUR to an average of 4,413 EUR/t. This divergence confirms that powders currently offer better returns, pulling milk into protein‑oriented streams and reducing the relative pricing power of butter. The continued strengthening of SMP futures at the EEX, alongside weaker butter contracts, further underlines this imbalance.

Internationally, the latest Global Dairy Trade auction saw the overall index rise by 3%, driven mainly by a 5.9% jump in whole milk powder and a 3.1% increase in skimmed milk powder values. By contrast, butter prices at the auction fell by 4.7% to just above 4,000 EUR/t equivalent, with anhydrous milk fat also down by more than 3%. This global weakness in milk fat, against firmer powder prices, is consistent with the European picture of a relatively softer butter complex.

Short-Term Outlook & Trading Ideas

With European milk supply stabilising from low levels and France still underperforming last year, the downside for butter from the supply side appears limited. However, the combination of firmer powder markets, higher raw milk values and weaker international butter benchmarks suggests that butter may lag other dairy products in any near‑term price recovery.

• Buyers / Users: Consider covering a portion of Q1 2027 needs on current spot and nearby contracts while EEX butter and physical prices remain under pressure relative to powders, but avoid over‑coverage given still‑soft global fat sentiment.
• Producers: Use the relative strength in skimmed milk powder and the higher Kiel milk value to stabilise margins, while remaining cautious about aggressive butter price expectations in export negotiations.
• Traders: The butter–SMP spread argues for cautious long exposure in butter only when clear signs emerge of tightening fat supply or improving demand; until then, relative value may continue to favour powders.

Over the next three trading days, European butter prices on key exchanges are likely to remain broadly range‑bound with a slightly firmer bias, supported by higher milk and powder values but capped by weak international fat benchmarks and cautious demand.