A Dairy Dilemma: Supply and Demand Pressures

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Everything's better with butter!

So maybe it should be no surprise that butter inflation has been particularly intense in recent months.

This year, the UK saw its 12-year high in butter prices, with like-for-like rises across Europe and Asia....

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Supply side issues

The supply of butter has been constrained by drought and higher feed prices on the supply side, this has apparently resulted in smaller herd sizes which means butter is relatively more expensive to produce.

And of course the climate-squeeze doesn't help this as a background factor.

And then there's increasing demand....

While the thought of butter takes me back to the 1950s, butter is actually back in fashion today.

There's something of a trend on TikTok for 'butter boards' and increasing interest in paleo and keto diets have also spurred demand.

A Financial Times (2022) report delineated that Instagram food culture has considerably driven consumption, especially among younger consumers

This surge in demand for butter also has psychological roots. In times of economic downturn, consumers turn to less expensive vices. It's like your once a week latte or trip to the nail bar, butter offers indulgence when more expansive luxuries like travel or dining out are not feasible.

This "lipstick effect" of butter—small luxuries thriving in hard times—accounts in part for the surge in demand at higher prices.

Where next for the price of butter...?

It would seem that the butter price is a reflection of cultural shifts: our desire for something easy and comforting in hard-times.

And with supply-side constraints such as rising feed costs I think it's unlikely that the price is going to come down any time soon!

dairy cent proofofbrain neoxian
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12 comments
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Interesting to see the increasing demand - I hadn't considered that side.

But the supply side of things is definitely an issue. I know quite a few farmers who are getting out of dairy, and the reasons they give are usually a combination of different degrees of three key issues;

  • Supermarkets forcing long term contracts that pay below production cost for dairy and meat products.
  • Offers from energy companies to buy land to use for renewable power - often at substantially above the going rate, but which take land out of agricultural production for good.
  • Reduced government subsidies and increased taxation, particularly the new inheritance tax regime which is clearly intended to eliminate smaller farmers and pool agriculture into a few conglomerates owned by global corporations (i.e. political donors).
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There's pressures on all sides... more competition for a buttery pie which isn't getting any bigger!

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How much is butter now in the UK? I bought some here last week when on special and it was R59.99 a block for 500g so roughly 2.60 GBP each. The prices vary so on average I would guess R79.99 or 3.50 GBP per block which is madness. There will be a price where people will just not buy it and then producers are screwed.

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It's around £2.00 for 250 grams not quite out of reach. I think the big supermarkets are just taking a profit hit!

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I can recall retailers making roughly 15-20% as a standard and now it is more like 30% which is absolutely bonkers.

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I hadn't even noticed. Butter in Texas is almost $5/pound. I hadn't noticed it creep up from around $3.50/pound in 2020. Fake butter, vegetable oil spread, is around $1.30/pound. Despite the price difference, we still tend to buy real butter for cooking. We buy margarine mostly for spreading on toast as it is softer out of the refrigerator. In Texas, we can't leave butter out to soften as it melts before you know it.

I vaguely recall reading books, it might have been those by Charles Dickens, in which butter was typically only in the households of the working class or higher. Unless you lived on a farm and could make your own butter, living in the city made butter a bit of a luxury item. By this I mean to point out that butter affordability might be a rough economic indicator for prosperity.

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Hmm interesting idea... it's certainly pricier than those awful spreads it cld well be one of those general indicators!

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I buy butter for $4 a pound. It seems like about 5 years ago it was about $2 a pound (due to promotions in the store). It's good that we hardly eat it, only in porridge and with red fish. Milk has also become more expensive, but sour cream, oddly enough, has become only a little more expensive.

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