Changing demand in the market and imbalances in production threaten to push prices to record levels.
Peder Tuborgh, CEO of Arla Foods, one of the largest dairy cooperatives in the world, with 12,500 dairy farmers in the EU, spoke to Reuters last Friday.
He said: “After the very low prices last year, there is currently a milk crisis all over the world.
“It will definitely not be possible to satisfy the demand until Christmas.”
The EU ended milk quotas last year which rocked the market and led to massive price drops, German newspaper Euractiv reports.
Now there are bottlenecks for milk, cream and butter that are leading to “significant” price increases, explained Tuborgh.
He announced that Arla would increase the price paid by the cooperatives to their farmers in September again – to €38.30 per kilo. This is the third monthly price increase in a row.
At a price of €612 per 100 kilograms, butter is currently on average more than double the price than at the same time in 2016.
The shortfall in the EU market will reach 60,000 tonnes by the end of the year, according to estimates.
The European Commission, however, says that this is not due to milk shortages but changes in demand within the dairy sector.
Speaking to EURACTIV.com, an EU Commissioner said: “In June, production in 19 Member States has increased so much that the losses in the nine others (including France and Germany) have been more than compensated for.”
Overall, the EU executive expects EU milk production to be about one million tonnes higher this year than in the previous year.
“The current butter situation results from fierce competition about the fat percentages in the milk,” the EU official said.
“It is mainly due to the fact that fat milk is increasingly used for the production of cheese. The demand for cheese is currently high and the producers can get higher prices with cheese than with butter production.”
Pekka Pesonen, Secretary General of the EU’s Copa-Cogeca farmers’ association, sees another cause of the butter shortage being booming exports to the USA.
There, consumers buy more butter instead of margarine. Pesonen explained that farmers are satisfying the demand for milk fats and do not want to contribute to surpluses in price-damaging products such as skimmed-milk powder.
He said: “What must also be addressed is the inter-relationship between the butter prices in the supermarket and the prices the producers receive. “Producer prices have not risen as much as retail butter prices. The food chain needs to be optimised and work better.”