Global butter shortage begins to bite

Business Times13 Feb 08;

(SYDNEY) Australian pastry chef Tracy Nickl never imagined he would have to tighten security at his country bakery to ensure nobody stole his butter.

But when he realised the value of his yellow stockpile had reached more than A$20,000 (S$25,600), he decided it was time to put in an alarm system and have a security guard patrol his business at night.

'It's incredibly valuable,' he said. 'Its price has gone from 100 boxes being worth A$6,000 or A$7,000 ... now it's worth A$20,000. You don't have that kind of money sitting around without protecting it.'

Australian bakeries are the latest in a long line of victims of increased global demand for dairy products and the country's long-running drought - with the all-important ingredient butter becoming harder to find and more expensive.

Mr Nickl, who owns the Gumnut Patisserie in the Southern Highlands southwest of Sydney, said he orders butter every week from three different suppliers 'and (we) just hope and take whatever arrives'.

'It's a commodity that's incredibly hard to get,' he said. 'You'll go for weeks and weeks with a specific supplier not being able to give me any.' Mr Nickl said he noticed the butter shortage begin to bite in June 2007, just as the country was praying for rain to end the worst drought in living memory.

Since the beginning of last year, the price of butter has tripled, he said.

'Whereas once upon a time I used to scream if I was paying more than A$70 a (25 kilogram) box, now if I am paying less than A$200 I am pretty happy,' he said. 'It's horrifying.'

'And on top of that our flour price has gone up 100 percent. So we're getting nailed from every angle,' he added.

The frustration is echoed by Sydney cake maker Michael Hughes who has been forced to lift prices and to be more stringent with butter to conserve his supply.

'We've been a lot more careful about it, gone for product lines that don't have lot of butter,' Mr Hughes said.

'My suppliers keep telling me, 'Brace yourself, because it's only going to get worse'.' Bakers say it is the convergence of two factors - skyrocketing global demand for dairy and the drought in Australia - which have caused the price blow-out.

And because butter, unlike milk, can be safely stored for months, some producers are believed to have built up stockpiles which are further squeezing supply.

Add to that flourishing demand from Asia, and it's a recipe for disaster for small cake shops, patisseries and bakeries.

'The Chinese market has just increased its appetite for things like cream cheese,' Mr Hughes said. 'China has just discovered cheesecakes.'

Joanne Bills, manager of strategic knowledge at Dairy Australia, downplayed the impact of exports on the butter supply, saying drought was the main factor.

'We have had a fairly severe impact from drought,' she said. 'And so milk production for the first half of this current season is about 8 per cent down. -- AFP