French butter shortage may grease the wheels for Irish producers

My own favourite is the lightly salted demi sel. Butter. I eat it with everything and would certainly not stint on it in cooking, no matter what doctors say. Hence, partly, the ampleur of your correspondent. And so talk of shortages in France, and headlines about the threat to the croissant, and even suggestions that there may be no butter for Christmas, are deeply perturbing to one living in Brussels, although the butter famine does not yet seem to have affected us here yet.

But, as the New York Times put it the other day, "an empty butter shelf in France is like a dry baguette: deeply disconcerting". Last year the French consumed more than 8kg of butter per capita. That is more than twice the European Union average. And the French media is perturbed. Online a satirical, dystopian short film, Pénurie, even imagines a complete breakdown in law and order in butter-loving Brittany as the crisis takes hold: thieves steal butter from restaurants at gunpoint, illegal churns flourish, and Breton cake specialities are auctioned off for thousands.

We’re not there yet.

Producers in France are just shipping their butter over the border to countries where retailers are prepared to pay more

The shortages do appear to be primarily a French problem, but the specific challenges that French retailers are having with producers, in refusing to pay them what they say are inflated prices, reflect an international-trade dynamic that affects us all, albeit differently. Producers in France are currently just shipping their butter over the border to countries where retailers are prepared to pay more.

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“The issue is purely French and is related to the fact that there’s a price war raging between French retailers,” Thierry Roquefeuil, chairman of the milk-producers’ federation FNPL, told Bloomberg.

Well, not exactly. A slump in European dairy production and a surge in world demand has led to a spike in world butter prices: they have risen to nearly €6,800 a ton in September, from roughly €2,400 in April 2016. That’s the highest since the European Commission began collecting such data, in 2000, although Irish producers complain they are not getting anything like that.

Dairy production in Europe, which has been falling since the EU ended its milk quotas, in 2015, further slumped after the summer of 2016 because of bad yields from fodder crops and unfavourable weather. But demand for butter, whose reputation healthwise has taken a turn for the better, has risen in France alone by 5 per cent in the years 2013-15, and strongly internationally on the back of Chinese demand.

EU butter exports to third countries have nearly doubled in the five years to 2016, from 94,000 tonnes to 162,000, while its exports to the huge Chinese market have risen 20 per cent in the past two years. France sent two-thirds of that – about 4,000 tonnes – in the first six months of this year.

Higher domestic demand in the United States has also seen it export less to the world market.

Ireland remains the world's third-largest exporter of butter. Our main export markets include the UK, and it is concerns about Brexit that preoccupy the industry

And what, then, of Ireland's butter exports? Ireland remains the world's third-largest exporter of butter – with, in 2016, €588 million worth of butter and other milk-based-fat exports – behind New Zealand and the Netherlands. Our main export markets include the US, UK, Belgium and Germany, and it is concerns about the effect of Brexit that preoccupy the industry.

In 2016 34 per cent of Ireland’s dairy exports went to the UK, representing 53 per cent of cheese exports, 29 per cent of butter and 12 per cent of skimmed-milk powder. A failure to keep tariff-free access if there is no deal between the EU and UK could lead to steep WTO-level charges on butter.

According to Teagasc: "The loss of this market would require that more than 50,000 tonnes of Irish butter exports be absorbed in either EU27 markets or in the rest of the world." That's nearly the equivalent of a third of the EU's entire international trade in butter – a very tall order for Irish producers.

The time might be ripe, however, for a push into the French market.