Butter prices starting to soften.


It’s now a well-known fact that we currently have a global butter shortage on our hands which has caused butter prices to skyrocket. Since 2016 we’ve seen butter prices increase by as much as 100%. So how has this global butter shortage occurred?

The global butter shortage has essentially been driven by the shear increase in demand for butter. Particularly, the Greater China market is driving this demand with the value of butter exports to this region growing by 77% to $470 million. Coupled with this increase in demand we’ve seen a lack of farmer confidence due to the corporate restructure of the Australian Dairy industry and a decline in milk production due to the cattle industry being hit with a poor grazing season in 2016. Both these factors impacting the production of butter within the Australian market.

Fast forward to July 2018 and although butter prices aren’t as high as 2017 prices they are still well above average. Good news is, in our opinion there may be some relief in sight when it comes to butter. More USA butter has recently become available, so we are now seeing butter prices starting to trend downwards. We believe butter prices have peaked and prices should decrease between now and the end of the year. Butter is in such high demand and it will take time to replenish butter stocks, so the price decrease may not be severe, we should see butter prices gradually go down over the next six months.

Interestingly, what’s also contributing to the strong demand of butter is that consumer perceptions have been swayed by studies indicating the lower health risks from consuming dairy-fats and the detrimental effects of alternative trans-fats.

Consumers are demanding dairy products that are richer in fat as they are allowing fat back into their diets. To put it bluntly, sugar is out, and milk fat is a trend that’s back.

As the myths around dairy-fats were debunked, butter consumption rose globally. Time Magazine, a popular publication certainly had a hand in setting this trend by publishing an article in 2014 simply called ‘Eat Butter’ which received global attention. Butter was trending worldwide, and we started to see large companies such as McDonald’s switch to butter in their cooking as opposed to margarine. Consequently, this trend has translated into butter consumption increasing by 1.7 million metric tonnes per annum over the last 10 years.

By Dustin Boughton, Procurement, Maxum Foods.

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