Butter shortages abroad provide opportunities for dairy expansion

BUTTER shortages in Scandinavia, Russia and other parts of the globe suggest that Ireland’s long-term expansion strategy for the dairy sector is well founded, according to one Bord Bia expert.

Brian McNulty, the dairy ingredients sector man-ager with Bord Bia, said there are opportunities in these markets, which will be matched by more demand for butter and dairy products in other key markets.

While there has been some tightening in terms of the price being paid for butter in recent weeks, the longer forecast is positive.

Mr McNulty said: “In general — and notwith-standing current short-term downward price movements for butter — availability of butterfats have been affected by the following developments in the main producing areas, namely India, the EU, the US and New Zealand.

“In New Zealand, availability has declined due to a growing strategic shift by Fonterra from butter/ SMP towards WMP. Generally, in all the main butter-producing markets, demand is increasing much faster than the world’s ability to supply.

“It is a very positive backdrop to the Irish dairy sector’s ambitions to expand production by 50% following the end of the milk quota era in 2015. Everything is pointing towards a significant surge in demand, and that is a very encouraging backdrop for the Irish dairy sector.”

Mr McNulty said that in the EU, the availability of milk fats has fallen due to a decline in milk fat collected, as demand for dairy fats decreased as subsidies ceased.

He also said the EU is facing an arresting of the decline in butter consumption, as the “naturalness” of butter has made gains over previous consumer health concerns. The EU is also seeing a greater use of milk fat for cheese production.

Meanwhile, retailers in Finland, Sweden and Russia are reporting butter shortages in their stores.

Store owners say this is due to a surge in demand for butter, coupled with a shortage in the supply of raw milk.

Finnish reports have cited leading dairy processor Valio as stating it is struggling to meet demand. Valio has had to reduce its supplies both to Finland and Sweden due to insufficient milk supplies.

Valio said that it expects Finnish butter prices to rise, partly due to these shortages, but not exclusively as Finland has until now, had the lowest price butter in the EU. Despite this, Finnish milk prices are among the most expensive in Europe.

Bord Bia analysis suggests that the evidence of ongoing demand in Scandinavia and Russia is replicated in other markets.

Mr McNulty said: “In India — the main consumer of butterfats globally (mainly as butter ghee) — demand is growing as incomes rise ahead of that country’s ability to produce.

“These developments are reflected in the market situation described for Sweden, Finland and Russia and may indeed offer opportunities for the Irish dairy sector.”