Brits could face a butter and cream shortage by Christmas, Arla boss Peder Turborgh warned this week, causing a wave of panic in the national press that mince pies could be left bare and fridges bereft.

His warnings of a festive dairy famine were dismissed as “scaremongering” by the NFU, but with wholesale UK butter prices up by a staggering 108% year on year to record highs of £4,225/tonne [Mintec], supplies are obviously getting tight.

And Turborgh isn’t the first industry executive to warn of a growing butter and cream crisis as the fat shortage gathers pace across the UK and Europe. Wyke Farms MD Rich Clothier told The Grocer back in October 2016 that butter shortages were “inevitable” thanks to a perfect storm of market conditions.

So how did we end up in this mess? Here are five reasons the UK is on the brink of a butter crisis.

The Milk Crisis

Brussels farmer protests

Ironically, one of the biggest contributors to the current butter shortage was the oversupply crisis that hit in 2015 and lasted well into 2016.

The crisis - triggered by the lifting of the EU dairy quotas, a Russian ban on EU food imports and the slowdown of China’s dairy market - saw farmgate prices plunge to unsustainable levels and farmers aross Europe marching on the streets in protest.

The dramatic drop in profitability on milk meant many UK and European farmers were forced out of business. Others scaled back on production significantly, encouraged by the €150m subsidy scheme launched by the European Commission to try and reduce production across Europe.

By August 2016, UK milk deliveries were down 8% on the previous year, with EU production also dropping more steeply than anyone had predicted. About 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 shortages fell on supply into manufactured dairy products like butter.

Milk production is beginning to stabilise, with UK milk deliveries in April almost equivalent to the same month in 2016 at 1,25 million litres, and GB deliveries down just nine million litres (0.8%) year on year [AHDB dairy]. But the long period of shortages have taken their toll on butter stocks, which will take a while to replenish.

Skinny cows


Butter production has also suffered because of the poor condition of UK and EU dairy herds in the wake of the overproduction crisis, with farmgate prices so low that many farmers simply couldn’t afford to supplement feed last summer.

To make matters worse, grass energy levels were below the six-year average for most of the grazing season in 2016, meaning many UK dairy herds entered winter with lower than ideal body condition scores. This had an impact on milk fat levels, reducing availability for butter production.

Brexit export boom


UK butter and cream supplies have also been squeezed by growing export demand, because the devaluation of the sterling in the wake of the Brexit vote has made UK butter more competitive on global markets. This, combined with high butter prices in New Zealand, pushed UK butter exports up 58% year on year to 2,800 tonnes in January, according to Mintec.

Dwindling supplies are now starting to take their toll on UK butter exports, which were down 4% year on year in the first quarter of 2017 [AHDB Dairy]. In particular, there has been a steep drop in exports of packaged butter, with EU volumes down 28% and non-EU volumes down 82% compared with the same period in 2016.

Supermarket price wars

Tesco milk aisle

According to sources, supermarket price wars have contributed to butter shortages on two fronts. Firstly, the vicious price war that saw the mults cut a four-pinter of milk to just 89p at the start of 2015 contributed to the shockingly low farmgate prices that forced many farmers out of the sector, contributing to the plummet in production.

Secondly, a reluctance among supermarkets to put up butter prices despite surging wholesale prices reportedly meant some manufacturers chose to export instead, reducing UK availability. While retail prices for block butter have risen by nearly 10% over the past year, that pales in comparison to the 100% increase in wholesale prices for the commodity.

The big fat revivial

butter on table

In 2014, US publication Time Magazine published a front cover encouraging people to ‘Eat Butter’, admitting scientists had been ‘wrong’ about the dangers of saturated fats. It was a big move for the magazine, which contributed to butter’s downfall when it published a cover story featuring Ancel Keys - the godfather of the ‘saturated fat kills you’ theory - in 1961.

The ‘butter is better’ message soon crossed the Atlantic and since then Brits have been abandoning margarine and swapping back to butter with abandon. It’s a trend that has been seen across Europe, and it is boosting demand for butter at a time when supplies are extremely short.

Latest UK retail data shows block butter volume sales up 0.7% year on year, while spreadable butter sales are up 1.7% [Kantar Worldpanel 52 w/e 26 February 2017], compared with a 10.2% volume drop for dairy spreads