Butter shortage sparks 'major crisis' in Europe — with pastry costs expected to skyrocket

Sam Meredith

Europeans are consuming more and more butter at a time when prices are skyrocketing, stockpiles are running low and dairy giants are warning of an imminent shortage.

Chef Séverine Nobis, who jointly runs a Parisian pastry school in the French capital, told CNBC that market fears of a European butter shortage cannot be ignored.

"The real fear would be the expansion of global changes in eating habits. If butter demand were to explode, there could be a shortage and in this case the price of the viennoiseries (sweet baked pastries) would also explode," she said via email.

Nobis explained that Pâtisserie à la Carte had not yet passed the increase in butter prices on to their consumers. However, she admitted the patisserie would be forced to consider doing so in a "reasonable" way if the market has not stabilized by the fall.

"Today milk producers produce at a loss. We need to rethink the system so that they can make a living, avoid the closures of dairy farms and avoid the future shortage of butter."

Wave of panic

At the start of July, Arla boss Peder Tuborgh caused a wave of panic among consumers when he suggested that insufficient milk being supplied by farmers could result in a butter shortage. The CEO of the world's fourth-largest dairy company told the BBC that shoppers across Europe would start to feel the impact over the coming months.

Europeans are consuming more butter at a time when prices are skyrocketing, stockpiles are low and dairy giants are warning of an imminent shortage.

While Tuborgh's warnings were abruptly dismissed as "scaremongering" by the National Farmers Union, the case remains that an uptick in demand for butter comes at a time when milk production is declining and prices are soaring. The shortage of milk is reported to be particularly acute in France where farmers have concerns over a glut of 350,000 tons of powdered milk, which depresses prices further.

In June, butter prices surged 14% to hit all-time highs, according to official figures released by the UN Food and Agriculture Organization.

In the European Union, one measure of butter reserves had fallen to just 1,396 tons by the end of May, according to the EU. This marked a 99% fall from the 92,548 tons held in May 2016.

Butter prices hitting 'crazy' levels

Kevin Bellamy, a global dairy strategist at Rabobank, argued that the recent lack of supply coupled with a "long term shift" among consumers back towards more natural products had also attributed to the sharp increase in butter prices.

He pointed to Time Magazine's memorable front cover three years ago, in which the U.S. publication reported scientists had been "wrong" about the dangers of saturated fats and were now encouraging people to "Eat Butter".

Recent studies have also questioned the link between butter and cardiovascular disease, thus supporting consumer enthusiasm for the product. Further to this, negative publicity surrounding some vegetable oil-based spreads, such as margarine, also appears to have persuaded people to switch back to the dairy spread.

In August 2015, McDonald's announced it was switching to butter as consumer demand for natural products increased. Other companies soon followed suit.

France's Federation of Bakeries (FEB) said butter's meteoric price rise over the past 12 months constituted a "major crisis." Matthieu Labbé, a spokesperson for the FEB, told CNBC that he lamented the fact that butter prices had climbed to "crazy" levels.

"In France, if bakeries wish to make croissants, pain au chocolat or patisseries then consumers will have to pay more. We hope they understand our position because making quality products means charging a higher price at this time," Labbé said via phone interview.