China’s huge demand for dairy is driving up butter prices

CHINA’S endless demand for Australian dairy and baby formula is behind the butter price rises — and it will soon force bakeries to switch from using butter to margarine to survive.

Many sausage rolls, Swiss rolls, biscuits and croissants will start tasting different as bakeries deal with a 30 per cent increases in the cost of butter.

The value of dairy exports to China in 2016-17 was about $403 million, up from $144m five years prior.

IBISWorld figures also reveal China is taking 67 per cent of Australia’s $45m infant formula export market, compared to 26 per cent five years ago.

IBISWorld senior analyst Sam Johnson said there is a link between the China’s insatiable demand for infant baby formula and the price of our butter.

“Many dairy processors have diverted production towards more value-added products that attract a premium, including cheese, cream and, to a somewhat lesser extent, proteins and infant formulas,” he said.

“So, rising production of higher priced dairy products has reduced butter supply, contributing to higher butter prices.

“Despite high butter prices, many Australian dairy processors have yet to respond with significantly higher output, instead continuing to channel milk into production of value-added products.”

Unable to increase their prices, many bakeries are instead mixing margarine into the formula they use to make baked goods.

The continued decline in skim milk consumption, extreme weather events and dairy producers’ desire to sell value-added premium products have all contributed to spread hip pocket pain across the country.

Essence Patisserie owner Brendan Giardina said he has already tested croissants, sausage rolls, shortbreads and lemon tarts using butter substitutes such as margarine.

“By using half butter and half (butter) substitute you get about 70 per cent of the original flavour,” the Rouse Hill businessman told The Sunday Telegraph.

“If there is another price rise before Christmas, which there is likely to be, then we will switch to using butter substitutes.

“Otherwise we would have to increase the price. I would prefer to sell more at the same price rather than put the price up and sell less.

“We are a family-orientated area so we don’t want to put the price up.”

Parramatta’s T & J Bakery Cake Shop manger Grace Zhou has already included margarine in their baked goods, saying customers would not tolerate even a $1 increase in price.

The Sunday Telegraph has spoken to two other Sydney bakeries which are doing the same.

The pain is also hitting restaurateurs like French-born chef Guillaume Brahimi.

The Guillaume Paddington owner goes through 100kg of butter a week and said price are going beyond.

Mr Brahimi ruled out cooking with margarine, saying he is looking at alternative ways to recoup his losses.

“Forget about North Korea, there is a butter shortage in France and beyond,” he said.

“We are giving butter away when people arrive. Maybe we need to start charging for it.”

The price of butter on supermarket shelves has increased 30 per cent in the past 12 months, according to industry body Dairy Australia.

Source: http://www.weeklytimesnow.com.au/agribusiness/dairy/chinas-huge-demand-for-dairy-and-australian-baby-formula-driving-up-butter-prices/news-story/e38719ffa0335100d60c35874dbe8635

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