Buttering up the relatives could be pricier than ever this Christmas as a potential shortage of dairy produce hits the cost of mince pies, Christmas cake, brandy butter and cream.

Butter prices have soared more than 20% in the UK in the past year to hit an all-time high as farmers and dairies struggle to cope with demand.

The boss of dairy company Arla told the BBC a plunge in production by dairy farmers could translate to a butter shortage by Christmas.

He said farmers had “hit the brakes” in 2016 after a drop in milk prices, with production down by 5% to 10%. Many farmers quit the dairy industry after prices slumped in the wake of a Russian ban on EU imports and heavy price competition among supermarkets trying to fight off the rise of discounters Aldi and Lidl.

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“At Christmas time there will simply not, in Europe, be enough butter and cream around. We know that as an industry. I know that from our forecasting,” Peder Tuborgh said. “The prices of butter will rise very sharply and there is more to come. At the moment we are trying to get as much butter and cream out of our producers as we can.”

The fall in production has combined with rising demand for butter in the UK. Sales of packs of butter and spreadable butter are up 0.7%, according to analysts at Kantar Worldpanel, while sales of alternative spreads are down by more than 10%.

“Inflation in butter is much higher than for other groceries. What’s different is a shift in consumer behaviour away from vegetable spreads to real butter,” said Rachel Knight, a consumer insight director at KW. “Shoppers are now willing to pay more for something natural and less processed.”

The warnings about shortages in the UK echo the situation in France, where prices of butter by the tonne doubled in a year, according to the baking industry body Fédération des Entrepreneurs de la Boulangerie.



In the UK, where 98% of us put butter in our weekly shopping basket, butter has been cited as a key driver of inflation. British cake producers have said the rising cost of butter will bump up their prices. Inflation has also been pushed up, as the rise in the value of the euro against the pound has made it more profitable to sell dairy produce abroad.

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Despite increased demand and price rises for shoppers, farmers said they were not seeing increased profits. Britain’s National Farmers Union said while there had been record prices for wholesale cream and butter in recent weeks, farm-gate prices had failed to keep up.

An NFU spokeswoman said: “Over recent weeks here in the UK and across the EU, we’ve seen record prices for cream and butter at wholesale and a buoyant market, but farm-gate prices have failed to keep up – a time lag we can understand, but the lack of strong upward movement in the farm-gate milk price is extremely concerning.



“The constant boom-and-bust dairy market cycle helps no one, most of all farmers who, at the bottom of the supply chain, are facing the biggest volatility risk.



“Only a few months ago, farmers were being told there was too much milk: now it’s gone full circle. This isn’t sustainable from a farmer point of view, and we need to find a better mechanism to work together with the processors.

“It’s no surprise that milk buyers are worried about milk volumes falling. Confidence within dairy farming is at an all-time low [due to] mistrust in the market dynamics and suspicion about how milk buyers are treating their supply base, coupled with the lack of direction on the impact of Brexit on the dairy sector.”