How To Decrease the Price of Butter

We could say that Poland’s butter markets are having a meltdown.

The problem is the price.

Poland’s Butter Prices

Planning for an unknown future, Poland created a butter reserve that lets them control supply. Now, they need it.

By selling 1,000 metric tons of frozen butter, they hope to lower consumers’ prices. Through an auction, they will offer businesses 55-pound blocks (25 kilograms) of butter for a minimum price of 28.38 zlotys ($7) per kilo. By contrast, the supermarket price is approximately 39.90-49.95 zlotys ($9.84-$12.32) per kilo.

Between early November and early December Poland’s butter prices rose by a whopping 11.4% while for the year, the increase was 49.2%.

Similarly, EU butter prices are skyrocketing:

Actually, though, the problem is milk. Explained by a dairy processing website, milk production has two components. It depends on the number of cows and what each cow produces (PPC). In the EU, lower profits have reduced herd size while they have some problems with disease. In addition, the U.S. is sending less milk to world markets, the Russian war in Ukraine elevated energy costs, and switching to cheese could be more lucrative. However, looking further, I also discovered that individual cow productivity (PPC) is slightly up as is global demand.

The net result of this slew of variables is soaring butter prices.

Other Reserves

In addition to butter, Poland’s reserves include more dairy products and sugar. Not alone, the U.S. has one for oil, helium, and even a raisin reserve. Meanwhile Canada has a maple syrup reserve and China has one for its pork supply.

Our Bottom Line: Supply and Demand

On the following butter graphs, you can see classic supply and demand. When production costs rise, supply decreases and shifts to the left.  As a result, the equilibrium price of butter is higher. Then though, as more butter enters the market, supply shifts to the right and price decreases.

(Graph #1) Poland’s higher butter prices:

(Graph #2) The impact of the reserve:

My sources and more: Thanks to Slate Money for alerting me to the FT article on the butter reserve. Meanwhile Fast Company had more detail as did this dairy site and euro news.