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Europe is running out of butter

Posted August 9

Europe is facing a major butter crisis.

A sharp increase in global demand has caused the wholesale price of butter to nearly double in Europe. Consumers are paying more too: retail prices jumped nearly 20% in June over the previous year, according to data from Euromonitor.

Federation des Entrepreneurs de la Boulangerie, an industry group that represents French bakers, has described the situation as a "major crisis." It is warning of a sharp increase in the price of croissants, tarts and brioches.

"The price of butter, while certainly volatile, has never reached such a level before," the group said in a statement. "Butter shortages appear to be a real threat by the end of the year."

There are multiple factors behind the skyrocketing prices: Consumption of butter is booming thanks to higher demand from countries including China, and some customers are returning to the dairy product after doubts were raised over its links to heart disease. Meanwhile, production has dipped in Europe.

Everyone's eating

Global butter consumption is rebounding after years of declines, when consumers ditched butter for margarine and other substitutes.

The average European ate 8.4 pounds of butter in 2015, the most recent year available, compared to 7.9 pounds in 2010. The average American consumed 5.6 pounds of butter in 2015, up from 4.9 pounds in 2010, according to the U.S. Department of Agriculture (USDA).

At the same time, Chinese demand for foreign milk products is booming. The USDA predicts that Chinese milk imports are expected to jump by 38% this year, with almost all of it coming from the EU and New Zealand.

USDA predicts that global butter consumption will grow an additional 3% this year.

Health factors

Recent scientific studies have suggested that butter, which had been linked to heart disease and increased risk of death, might not be as unhealthy as previously thought.

One such study, published in 2016, indicated that butter actually has more of a neutral association with mortality.

Related: Qatar airlifts in cows after Arab embargo cuts milk supplies

Slow churn

The butter price collapse follows years of tumult in the continent's dairy industry.

In 2014, Russia slapped an embargo on European food products in retaliation for sanctions imposed over its annexation of Ukraine. Russia had accounted for 24% of EU butter exports.

The result was dramatically lower prices. In many EU countries, milk was cheaper than bottled water.

The EU would go on to intervene in the market, but many dairy farmers went out of business.

The looming shortage

The next worry is a shortage of butter in Europe.

Butter production slumped 5% in the year to May 2017. Meanwhile, butter stockpiles have plunged 98% in a year, according to the European Commission's Milk Observatory.

"While supplies remain tight and demand has increased, there has been a shortage of butter in the EU, causing prices to soar as buyers try to lock into contracts to obtain stocks," said Michael Liberty, dairy market analyst at Mintec.

Peder Tuborgh, CEO of U.K. dairy giant Arla, warned the BBC last month that there might not be enough milk and cream to go around at Christmas.

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