Australian food manufacturers facing butter shortage

Small to medium food manufacturers are currently facing a butter shortage due to a combination of a drop in overall milk production, an increase in demand nationally and a change in consumer tastes.

According to Dairy Australia senior analyst John Droppert, more consumers are drinking full cream milk than they were previously. This has become an issue for butter production, which requires the fat removed from full fat milk.

There has been a nine per cent increase in full cream milk sales over the past 12 months, which takes a lot of fat out of the supply chain, said Droppert. An overall drop in Australia’s milk supply has not helped matters.

According to Droppert, smaller manufacturers of food products with butter as the main ingredient are facing higher prices, and distributors of butter are having difficulty sourcing supplies from manufacturers.

Manufacturers that require fewer pallets are suffering compared to bigger companies, due to a lack of long term arrangements with suppliers, resulting in a lack of guaranteed supply. Some small to medium manufacturers are even resorting to buying butter off supermarket shelves due to the price increase on the supplier level, said Droppert.

However, the analyst has assured that the shortage will flatten out soon due to increased skim milk prices on supermarket shelves.

“Anything that pulls more money from the end user at the industrial level, that puts more money in the supply chain so that does flow through to farmers eventually,” Droppert told the ABC.

“The question we have is to what extent is that being offset by low skim milk returns, with one doing particularly well and one doing particularly badly, and they’re both being made from the same one litre of milk,” he added.