Limited EU farm response to record high butter prices

Published 30 October 17

The normal economic reaction to high prices is an increase in supply. So while international butter markets were rising to record high levels, you would normally expect to see suppliers take advantage of the high prices by producing more fat. In reality, the EU supply end response to record high prices has been somewhat muted.

During the first five months of 2017/18, farmers across the EU-28 produced just 0.8% more butterfat than they had the year before – hardly a significant response to the growing butter shortage. When delving into the reason for the extra butterfat, the story is even more concerning. The majority of the extra butterfat has come from increased milk production in some countries such as Ireland – a response that will have also delivered more skimmed milk into a market already awash with high stocks of skimmed milk powder.

 EU butterfat production Oct17

Of the main milk-producing countries of the EU, only two have actually recorded an increase in the level of butterfat in their milk. Poland recorded the biggest rise, increasing from an average of 3.94% to 3.96%. However, the UK is the other nation to show a rise, albeit a small one, with butterfat levels rising from 4.00% to 4.01%. All of the other main milk-producing countries in the EU recorded year-on-year declines, leading to the EU-28 butterfat level dropping from 3.98% to 3.95%.

Over the same period, the top 10 EU milk-producing countries all recorded year-on-year increases in their average protein levels.

 EU butterfat averages Oct17