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French Butter Melts Away From Shelves As Global Demand Soars

Published on Oct 31 2017 12:10 PM in Supply Chain tagged: France / Butter / French food

French Butter Melts Away From Shelves As Global Demand Soars

France’s much-loved croissant au beurre has run up against the forces of global markets.

Finding butter for the breakfast staple has become a challenge across France. Soaring global demand and falling supplies have boosted butter prices, and with French supermarkets unwilling to pay more for the dairy product, producers are taking their wares across the border.

That has left the French, the world’s biggest per-capita consumers of butter, short of a key ingredient for their sauces and tarts.

“The issue is purely French and is related to the fact that there’s a price war raging between French retailers,” Thierry Roquefeuil, chairman of milk-producers’ federation FNPL, said in a phone interview from his farm near Figeac, in south-western France.

“French retailers refuse to increase prices, even by few cents, even for butter. Dairy producers see that there’s an outside demand at higher prices, so they sell abroad, and rightfully so,” Roquefeuil continued.

Global butter prices have almost tripled to €7,000 a tonne from €2,500 in 2016, according to Agritel, a Paris-based farming consultancy. In Europe, prices peaked at about €6,500 a tonne in September – the highest since the European Commission began collecting such data in 2000.

French Honour

While France’s Food Retailers’ Federation is underplaying the shortages as a temporary logistical problem linked, in part, to people hoarding butter, the issue made it to the floor of the French parliament last week.

Questioned by lawmakers, Agriculture Minister Stéphane Travert said that he hoped a deal could soon be found between retailers and dairy producers.

“I want to reassure all the consumers that soon butter will find its way back to shop shelves, and consumers won’t be deprived of this French commodity that does honour to French tables and is the pride of French dairy production,” Travert said in the National Assembly on Wednesday.

A report released Saturday by the consulting firm Nielsen showed that 30% of butter demand in French supermarkets wasn’t met between 16 and 22 October. The proportion was as high as 46% in some stores, mostly due to hoarding, it said.

The problem can be traced to the end of milk-production quotas in April 2015, which led to a glut early last year in Europe, and a drastic drop in prices. This prompted production cuts by spring this year.

The reduction coincided with other global milk-product exporters curbing their own output. The US stopped selling abroad to address higher domestic demand, while New Zealand, the world’s biggest dairy exporter, experienced lower production due to droughts, Pierre Begoc, an Agritel analyst, said in a phone interview.

Market Forces

“The butter shortage in French supermarkets is the direct consequence of the 2016 milk crisis, which prompted a 3% drop in production,” Xavier Hollandtsni , a Kedge Business School strategy teacher and an expert on agricultural matters, said via a note Thursday.

The butter market also encountered a push from the demand side. Butter and cheese remain the dairy products in highest demand, especially in Asia, according to Agritel’s Begoc.

“Global demand started to pick up, with China starting to buy again after having stopped for a few months to tap into its stocks, leading to a substantial rise in milk and butter prices,” Begoc said.

French retailers have not adapted to the new market reality and have kept a cap on prices, Roquefeuil said. For French dairy companies, it’s easier to export to countries such as Germany, where retailers are willing to pay a higher price, he said.

“There’s an evolution of butter consumption,” he said. “Demand is strong, and the industry has to adapt to the new consumption.”

Panic-Buying

The shortage in France has been compounded by a panicked rush by consumers to stock up in the past few weeks. The food retail group has said that any butter shortage will be short-lived.

Industry projections show that after the recent peak, butter prices may head down slightly, as milk production is now picking up, Agritel’s Begoc said.

That should come as a relief to French consumers, who need butter not just for their tartines and croissants, but also for cooking sauces and baking everything from a tarte Tatin to an eclair au chocolat.

News by Bloomberg, edited by ESM. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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