Arla Foods – which is owned by over 12,000 farmers across Europe and around 2,500 in Britain – say the shortage is due to insufficient levels of milk being supplied to make the products.
The cooperative, which has many farmer members based in the South West, added that it expected the price of butter to rise “very sharply”. Peder Tuborgh, chief executive of Arla Foods, said this would be the “first sign” to impact on consumers.
However, he told the BBC that he did not want to predict how much butter would cost later this year. “At the moment we are trying to get as much butter and cream out of our producers,” commented Mr Tuborgh.
He added that the shortage of milk had arisen due to dairy farmers “putting the brakes on” last year, in the wake of a period of over-production, and consequently lower milk prices.
Dairy farmer and chairman of the National Farmers’ Union (NFU) South West dairy board, said that while farmers will be encouraged by the rise in commodity prices, “their phones will be hot as they call their milk buyers wondering why the money is not coming back to them”.
“Many are still trying to pay last year’s bills and we are still seeing producer numbers dropping,” said Mr Branton. “In the 21st century we need to ask if the systems are in place to try and mitigate the boom and bust market cycle.”
Mr Branton went on: “The whole supply chain urgently needs to look at how this works to see if we can do better. There are some promising examples of better practice which need more development, as these fluctuations are so damaging at every level. Whilst farmers will be excited by the prospect of better prices we need to recognise that we can only take this so far before customers look for alternatives.”
According to recent figures issued by the Department for Environment, Food and Rural Affairs (Defra), while farm gate milk prices dropped by 0.6% per litre in May this year compared to the previous month, they had increased by 31% compared with May 2016.
Defra added that British milk production rose by 4.7% in May compared with April, almost equalling production in May 2016.
A spokesperson for Dairy UK, the body which represents the country’s dairy sector, said there had been “significant” recent increases in wholesale prices for butter and cream. They added that the global over-supply of milk less than two years ago had resulted in a “difficult time” for farmers.
Figures published yesterday by AHDB Dairy reveal that the proportion of dairy farms unable to cover cash costs of production almost doubled between 2016 and 2017 to reach nearly 40%. The number of herds that were able to remain profitable throughout the downturn, without the use of other income streams such as Basic Payments, was found to be less than 20%.
“This illustrates the fact that 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 commented.
Source: Devon Live