Although stocks of butter in Private Storage Aid (PSA) are high, the market remains surprisingly strong, says AHDB Dairy.
For the remainder of the year, most PSA stocks are due to come out towards the end of the year when production is seasonally low.
In theory, therefore, they shouldn’t have any major negative impact on butter pricing.
Private Storage Aid (PSA) schemes are administered by the Rural Payments Agency and help traders with the cost of putting products into storage.
This helps to stabilise the market for a product if there’s a surplus and prices become weak.
There has been some downward pressure on butter prices in the past six months (Nov-Apr).
Strong milk production in the EU led to a 12% increase in butter production over the period.
As this occurred at the same time that relatively large volumes of stock were coming out of PSA, prices declined by 15% although they remained above intervention level.
This seemed to change in May, when prices for butter showed some recovery.
On EU wholesale markets, quotations rose weekly and in the UK, spot markets saw prices rise by 9%.
Normally at this time of year, with milk production rising to its annual peak, product markets weaken and prices decline.
Volumes coming out of PSA were much lower in May, and the lower than expected peak in milk production meant available butter supplies became tighter.
