A headache for the French government has been created just as it tries to make the food chain fairer for farmers as the country is running short of butter. There are some supermarket shelves that are sitting empty even as the price of croissants is on the rise.
In recent years, the consumer attitudes towards butter, once shunned as unhealthy, has turned more positive and this has resulted in rising demand globally for the spread. This has coupled with the problem of falling milk production in the country which has resulted in the shortage.
This means that France has been caught short on supply of butter for various industries and for consumption by consumers. And with some businesses and industries halting deliveries and considering passing higher costs onto retailers and shoppers, the soaring butter prices and the reduced dairy supplies have put strain on producers and food businesses.
And grappling with a doubling of butter prices in the past year to record levels
above 6 euros ($7.05) a kilo are the makers of baked goods like croissants, in which butter makes up around a quarter of the content.
He had not yet increased his prices because of extra butter costs but may have to soon, said Samir Kichou while speaking to the media in his traditional bakery in Paris.
“Because the year-end holidays are approaching, with Christmas preparations and particularly the ‘Galette des Rois’ cake which needs a lot of butter, if there is not a significant decline, we will be forced to pass on the price rise,” he said.
With Danish-based cooperative Arla Foods saying in August that the continent might face shortages by year-end, European dairy processors and food industry groups have been warning of a squeeze.
And with some stores displaying signs explaining a shortage for certain brands, supermarkets in the capital and others parts of France have left gaps in their butter sections.
Arguing that what they are paid is more often tied to cheaper raw milk and milk powder prices, dairy farmers complain that they get little benefit from soaring butter markets.
“The problem is that on the French market the right signal was not given to dairy farmers, since prices were not adjusted in relation to the drop in dairy supply,” said Dominique Charge,
president of France’s federation of dairy cooperatives.
President Emmanuel Macron needs to honor an election pledge to change practices in the food chain so farmers get a better deal and the butter-supply tensions highlight the challenges faced by Macron towards meeting the election pledge.
Retailers and suppliers should agree price adjustments in order to maintain deliveries, said Agriculture Minister Stephane Travert to parliament on Tuesday while playing down the suggestion of acute shortages.
While the effects of the crunch could linger until the peak holiday demand period at the end of the year, with butter prices easing and milk output expected to pick up in the second half of this year, the dairy market has shown signs of correcting.
(Adapted form CNBC)