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The Smart Cube: Butter & Cheese prices set to fall during second half of 2022
The prices of dairy products have seen remarkable increases in the last few months. In recent weeks, it has been reported that the cost of spreadable butter has skyrocketed in UK supermarkets, with some selling one-kilogram tubs of Lurpak for more than £9, while milk prices around the country have also risen above the level of inflation. In fact, some suppliers are even warning that the UK is currently on the edge when it comes to facing possible dairy shortages.
There are several factors which have caused the prices of these dairy products to surge so far this calendar year, many of which stem from the ongoing war between Russia and Ukraine. These include high input and processing costs, as well as low labour availability, high leading time, and the current freight crisis, all of which have been further aggravated following Russia’s invasion of Ukraine.
Looking ahead to the rest of the year, Rohit Ranjan, Specialist – Dairy and Livestock, has given the following predictions regarding the prices of popular dairy products for the next six months:
- Butter – Although prices may remain well above 2021 levels, there is set to be a downtrend on account of growth in production and low demand. Butter production in Q4 is anticipated to increase by 2.8 per cent Quarter-over-Quarter (QoQ) as the demand for products such as ice cream – which, like butter, requires cream in the manufacturing process – falls during the winter months as less of it is consumed. Additionally, there is set to be a drop in demand from China as a result of the huge build-up of stocks
- Cream – During Q3, prices are expected to remain at an elevated level amid seasonable demand – stemming from popular cream-based foods, such as ice cream, being consumed in the summer – as well as the ongoing supply chain issues. Come Q4, prices are set to decline, on account of weak demand as well as a projected fall in the input costs for processing amid the anticipated fall in energy prices
- Mozzarella – There is set to be a decrease in price caused by three factors:
- Anticipated growth in production, cheese production is projected to grow by 0.5 per cent Year-over-Year (YOY) in 2022
- Low demand, following a shift in retail demand towards cheaper cheese, such as cheddar, as a result of the ongoing cost-of-living crisis in Europe
- Likely price correction after the historical peak in April
- Raw milk – Prices to remain elevated due to strong demand, from both the retail and hotel, restaurant, and institutional (HRI) sectors, in addition to an expected fall in milk supply during the non-dairy season, which runs from May to November in EU region
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