In 2007, the recorded production of butter increased by 50,000 tonnes on 2006 volumes to a total of 4.13 million tonnes. The EU and other western European countries account for almost half of recorded production, North America accounted for about 750,000 tonnes, CIS and Oceania both contributed approximately 500,000 tonnes, with Latin America and China/Japan/Korea producing the remaining volumes.
During the latter half of 2007, production increased rapidly due to high market prices and increased availability of milk fat. An exception was New Zealand, where butter production was significantly reduced during 2007.
Over the last 10 years, annual butter production has increased by 190,000 tonnes. Annual production volume peaked at 4.19 million tonnes in 2005, then fell to 4.08 million in 2006.
Butter retail prices rose by 50% in many EU member states between September and December 2007. This price hike had some negative impact on demand, particularly in Germany and Poland, which resulted in excess supplies followed by a fall in prices at the beginning of 2008.
Total world butter consumption usually mirrors production volumes, meaning over the past five years there have been smaller fluctuations, yet the overall level has remained relatively stable. Looking ahead, it’s possible that consumption may decline in established markets, but there may be gains in markets where butter consumption is currently at a low level. In several markets, the use of butter as a table spread is declining, but it’s increasingly being used as an ingredient in bakery, confectionery and ice cream.
In 2007, US butter exports grew strongly, but are expected to taper off towards the end of 2008 and decline slightly in 2009 due to the global economic situation, the dollar strengthening against the euro and increasing foreign production.
In the EU, less butter was exported in 2007 as many countries cleared their stocks and produced less. EU exports of butter are forecast to fall in 2008 as additional milk volumes are likely to be channelled into production of cheese. Exports from New Zealand are also forecast to decline, as are Australian exports due to the reduction in milk output.
The range of butter and spreads has increased rapidly over the past two decades in response to competition from vegetable oil-based products. New manufacturing technology has enabled butter and associated products to meet market needs for functionality. Historically, due to its flavour and dairy identity, butter and other milk fat-based spreads have a commercial value above that of most other natural fats and oils, but recently, competing vegetable fats and oils have also risen in price.
Organic butters and spreads are a potential growth area, but only account for a small portion of UK spending (less than 2%). However, this is a growing sector – according to Soil Association findings, UK sales of organic butters and spreads are up 16% since last year to £13m.
Esther Renfrew is dairy market intelligence manager at Zenith International. You can contact Esther by clicking here.
To see a list of the top five butter producers, butter consumers, butter importers and butter exporters, please see the latest issue of Dairy Innovation (issue 23).
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