Rising prices may continue

Prices on the up across category

• Supply and demand is “finely balanced” in the butter market at the moment.

DAIRY prices have skyrocketed over the last 16 months according to the latest figures from the Office of National Statistics (ONS), which has found the category to be a major driving force behind food price inflation.

These findings might come as little surprise to retailers who will have seen 500g of spreadable butter break the £3 barrier with ease in 2017. Last year’s big investment story might have been Bitcoin, but while the cryptocurrency’s price crashed with the arrival of the New Year, dairy prices show no signs of falling back to Earth.

One report on the category from industry body Scotland Food & Drink suggests that there are many reasons to believe the price of dairy will continue to rise.

A market overview from the organisation found:

• EU butter stocks are tight, running at around 60% of typical levels for the majority of 2017.

• EU butter production in the 12 months to August 2017 was down 5.7%, with UK butter production down 12.1%.

• In the absence of significantly more milk availability for butter production in the spring, the tightness in the market will remain, although perhaps not to the degree seen in 2017.

Using data sourced from Kantar Worldpanel, Scotland Food & Drinks also revealed that growth in the UK retail dairy market was ahead of the curve last year, with the category up 3.8% year on year for the 12 weeks to 8 October, compared with 3.5% for the total grocery market and 2.7% for fresh and chilled.

Butter was the biggest contributor to dairy growth, with Scotland Food & Drink finding gains being made “almost completely through increasing prices”.

The report concluded: “The growth in butter has been seen across all social classes and life stages except young families, who instead are switching to margarine in response to rising prices.”

Market overview: Dairy prices continue to rise

Commodity Dec-17 Nov-17 Monthly change Dec-16 Annual change
Block butter (per 250g) 175p 176p -1p 148p +27p
Spreadable butter (per 500g) 340p 339p 1p 296p +44p
Margarine/low fat spread (per 500g) 144p 113p 31p 142p +2p
Pasteurised milk (per pint) 45p 44p 1p 43p +2p
Cheddar (per kg) 773p 744p -11p 697p +36p
Commodity 28 Jan 2018 31 Dec 2017 Monthly change 29 Jan 2017 Annual change
Retail milk, 4 pints 111p 111p n/c 103p +8p

• Data sourced from ONS Retail Price Index (RPI) which measures average price changes in the UK. All prices listed in pence.