Butter and cream prices ‘to rise by Christmas’

Dairy prices will significantly increase by Christmas, said Arla boss Peder Tuborgh

A butter and cream shortage will hike prices quickly by Christmas, warns Arla Foods boss Peder Tuborgh.

The UK was facing “significant inflation” on butter and cream, because there wasn’t enough being produced, said the Arla Foods chief executive. Tuborgh’s warning came after farmgate milk prices rose 26% since June last year, according to latest data from the Agriculture and Horticultural Development Board.

“Particularly in the area of butter and cream, we need demand to slow down a bit, because by Christmas time, in Europe, there will simply not be enough milk and butter around,” Tuborgh told BBC’s Today programme.

“The first sign you’ll see is that the prices on butter, for example, will rise very sharply, and we’re already seeing that. At the moment, I think we’re all striving to get as much milk and butter out of products as possible.”

‘Put on the brakes’

The shortage came after dairy producers “put on the brakes” last year, following a global oversupply of dairy and, therefore, cheaper prices, Tuborgh said.

“The [dairy] quotas all over Europe, which were regulated by Europe and kept production at a certain level, were set free, which meant farmers started to produce [lots more dairy],” he added.

Butter and cream price rises – at a glance
  • UK ‘to see significant inflation’ on butter and cream by Christmas
  • Due to milk shortage
  • Farmers ‘must produce more’

Dairy markets were subject to fluctuation in short spaces of time, said industry body Dairy UK. Dairy product prices were set by retailers, it added.

A Dairy UK spokeswoman agreed: “There have been significant increases in wholesale prices for butter and cream recently. To what degree price increases are transmitted to consumers is a matter for retailers.

‘Significant increases in wholesale prices’

Quick changes to the amount of milk produced, or unseasonable weather, could have a big impact on dairy product prices, Dairy UK added.

But, the National Farmers Union (NFU) said farmers needed better market signals to keep up with the changing demand.

NFU chief dairy advisor Sian Davies said: “Farmers need to be demand led, they need better market signals. Only a few months ago farmers were being told there was too much milk; it’s gone full circle.

“This isn’t sustainable from a farmer point of view, and we need to find a better mechanism to work together with the processors.”

Meanwhile, the Department for Environment, Food and Rural Affairs (DEFRA) said it had taken action to ease farmers’ cash flow problems. See the box below for more information.

What they say about dairy prices
  • “In the area of butter and cream, we need demand to slow down a bit, because by Christmas time, in Europe, there will simply not be enough milk and butter around.”

Peder Tuborgh, Arla Foods

  • “Dairy markets are inherently subject to fluctuations and a sudden surge in milk production or unseasonable weather, which depresses production, can have a significant effect on wholesale prices for commodity products like butter and cream.”

Dairy UK

  • “Over recent weeks here in the UK, and across the EU, we’ve seen record prices for cream and butter at wholesale and a buoyant market but farmgate prices have failed to keep up – a time lag we can understand but the lack of strong upward movement in farmgate milk price is extremely concerning.”

Sian Davies, NFU

  • “Although farmgate milk prices continue to recover, we understand the pressures facing dairy farmers, and have taken action to ease their cash flow problems. We are working to shape future agriculture policy as we leave the EU, to deliver a profitable, market-driven and highly competitive industry in the UK.”

DEFRA

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