The wholesale butter price is now trading at £3,500/tonne, 72.5% up on last year [PTF], and with retail prices up 10%-15% over the same period, concern is rising of a repeat of the commodity spikes seen in 2007.
Prices have risen due to a combination of lower production after poor prices in 2008 and increased demand from China, Russia and India as the world recovers from recession.
Other dairy commodities have also risen sharply, with skimmed milk powder up 43% to £2,050/tonne [Mintec].
The rebalancing of supply/demand has filtered through to only a limited extent on-shelf. A 250g pack of own-label budget salted butter is currently 87p, up almost 10% from its 80p starting point when commodity rises kicked in last September [The Grocer 33]. Branded lines have risen more sharply. A 250g pack of Lurpak is now £1.37, up from £1.20, while 250g of Country Life is also 15% higher at £1.14.
Almost half of all butters, spreads and margarines were sold on promotion last year, up from just 20% in 2007 [Nielsen], but retailers have had to re-evaluate that strategy.
A major supplier played down fears the retail price would keep moving upwards, however. "It takes a little while for high wholesale prices to translate to the shelf. But suppliers and retailers want to look after consumers; we don't want to find shoppers switching to margarine."
"My view is the commodity price boom is a short-term thing," he added. "We have milk pools and brands and more stability these days."
Although shelf prices were unlikely to fall in the near future, EU farmers were getting more money for their milk while the spring 'flush' would also ease pressure on supply, said Rabobank analyst Mark Voorbergen, "to prevent further price rises after the next few weeks".