Bulk butter prices are still very soft, with little prospect of firmer trading while sterling remains as high as a kite. Parcels have been changing hands at prices as low as £1,700/t and very little over the £1,800/t mark. It is not hard to see why there are some very long faces. With the ebb tide running strongly on PSA stocks, cheap product is likely to be older butter from storage. At the end of January there were about 50,000t in storage with 10 weeks to run. Even allowing for delays in reporting, not enough progress was made in early February to get PSA stocks down without resorting to taking just any price. Present indications for bulk butter are not good, either. "There's too much fat on the continent and you won't get much more than intervention prices anyway," said a trader. With spot milk prices topping 20ppl, it does not even take a calculator to see that there is no money to be made using spot market purchases. It takes 20,000 litres of milk to make a tonne of butter and adding back in the £1,400/tonne offered for SMP at present still leaves the equation £1,000 a tonne short of the £4,000 you paid for the milk ­ before counting any other input costs. Cashflow is forcing some hands ­ even if butter is made for intervention, it still takes two months to get paid. However, butter made in the coming week will start to qualify for the next PSA scheme, which opens on March 15. Nevertheless traders are confident that next winter the butter market will be somewhat firmer than it is now. {{PROVISIONS }}

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