Supermarkets face surging prices for British butter and cheese as suppliers warn shortages are now “inevitable”.
In September, UK wholesale Cheddar prices were up 30.9% year on year to £3,175/tonne - their highest level since 2014 - while butter prices were up 75.8% y-o-y to £3,600/tonne [Mintec]. According to one UK buyer, butter prices have since reached a “record” level of £3,800/tonne.
Production has been hit by dwindling UK milk supplies, with deliveries down 8% year on year in August [AHDB] as farmers continued to scale back amid low prices. Around 30% of UK milk is produced by farmers on aligned liquid milk contracts, who are less likely to reduce herd sizes, so the brunt of the milk shortage has been focused on supplies into manufactured products, said Wyke Farms MD Richard Clothier. “Cheese-makers are seeing milk supplies down by well over 10%, because the farmers didn’t get the support that liquid milk farmers have had during the past two years.
“Supply disruption is inevitable and availability can no longer be taken for granted” he added.
Butter production has also suffered from a reduction in fat levels in UK milk due to the “poor condition” of the country’s dairy herd, said another source. Low milk prices meant many farmers could not afford to supplement feed this summer, he added.
Supplies have been put under further pressure by the surge in British exports since the Brexit-driven collapse of the pound, and shortages of butter and mozzarella are already being felt, suppliers warn. Cheddar is expected to follow in the next few months. “Mild is already getting tight and mature will be really tight from the beginning of 2017,” said the source.
Supermarkets will have to be prepared to pay “a lot more for the product” in the future or facing losing supplies to export markets, he said.
The situation will be compounded by the EU dairy scheme, which will pay farmers 12p/litre if they reduce production over a three month period, warned Clothier. “It’s a pretty good incentive not to produce milk. Unless we can get farmgate prices back up to 28ppl as soon as possible, farmers will stop producing it,” he added.
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