Butter shortage set to last through Christmas - Supply Management
Summer 2017 saw rising butter prices ©Tobi/123RF
Summer 2017 saw rising butter prices ©Tobi/123RF

Butter shortage set to last through Christmas

1 December 2017

Butter buyers have to put up a bit longer with the global shortage, but farmers are working to catch up with demand

It might be affecting the croissant market particularly hard, but it is not just the French who are struggling with #BeurreGate this winter. Buyers of butter worldwide have been experiencing what could be called an annus horribilis for dairy, with wholesale prices rising on the back of an increase in demand and a fall in production.

Farmers across Europe slowed milk production because of a glut in the market in 2016 after the EU milk quotas were cut in 2015, and production in Australia, another major dairy producer, fell as farmers downsized their herds because of an increased cost of production.

Butter can be made from the fat removed from full-fat milk to make the skimmed variety. So butter has been hit by a supply and demand double whammy, as consumers have started to favour full cream milk over skimmed. 

Over the summer, butter prices rose by 67% on last year. And SME manufacturers in Australia were reporting trouble in sourcing supplies, as international traders with longstanding arrangements were given priority. 

The growing middle class in China showing an appetite for Western breakfast products has had an impact too. Imports of butter, milk powder and cheese grew by 28% in September year on year, and the price of milk fats rose by 43%.

This helps explain the Food and Agricultural Organization’s butter price index rising in early 2017 three times more than the dairy price index of which it is a component.

Stabilisation of butter prices started in October, attributed to importers easing off on purchases, awaiting arrival of new supplies as production picks up.

The expectation of Peder Tuborgh, CEO of Danish-based dairy co-operative Arla Foods, is that prices will continue to level out, and production will catch up with demand – but not until post Christmas.

Butter export per countryButter price index

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