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Mar 16, 2009 10:13 AM

Why has the cost of butter gone up? Shenanigans?

Over in the UK, butter has gone up from about 70p to over £1.20.

Can anyone think of a legitimate reason, considering we have a whole bunch of cows here, which have not stopped producing milk to my knowledge?

I do believe we're being hustled.

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  1. soop, you're a smart guy. check out government regulations, input price hikes, dairy conditions, taxes....

    1. I know that many dairies have raised prices because they do not use milk with BGH, and the current economic situation almost certainly plays a role.

      3 Replies
        1. re: Soop

          bovine growth hormone. http://en.wikipedia.org/wiki/Bovine_s...

          but, its use may not be permitted in the u.k./ e.u.

      1. Everyone's costs are going up. Fuel costs are going up everywhere, from what I've heard. Costs of living are sure going up in the US, aren't they also going up in the UK? I've heard you've got a fair amount of protection on social stuff, but still... if it costs more to do business, then they're going to have to charge more, aren't they?

        1. inflation due to profligate government spending and money-creation.

          2 Replies
          1. re: alkapal

            No, what is happening in the US now (at least) is deflation.

            1. re: scoopG

              Yes. Butter (and milk) prices in Boston have declined recently to their levels of late 2007. The increase in costs in late 2007 into 2008 had to do with fuel prices - both the impact of ethanol on the cost of feed, and the cost of transport, et cet.

          2. While I can't speak specifically to butter in the U.K., I did just have a conversation with one my customers regarding the cost of chicken here in the U.S.

            The cost for nearly everything has risen to astronomical levels - and I posed this question to my customer who is a major chicken producer/distributor.

            The person I was talking to (a finance person at the company) said that the cost of feeding, processing and distributing the chickens has risen 20 fold in the last 18 months. The only way they can maintain the profit margins is to charge more.

            This manufacturer also has a restaurant supply arm of the business - a lot of restaurants have gone out of business or are simply ordering less chicken so this impacts the overall cost of their output.

            The person also told me that the purchase of pre-cut, pre-seasoned convenience food items, like chicken tenders, frozen breasts, pre-marinated chicken parts has decreased significantly - which to some degree I think we can be thankful! But, these were huge huge profit centers and they've had to raise prices on "whole" chickens to drive the revenue stream.

            While certainly not an apples to apples comparison, I'm sure that some parallels can be drawn.

            8 Replies
            1. re: chicaraleigh

              chic ~~ you state a good case and I'm sure that in one way or another what you say does apply to dairy. But there is one thing that bugs me, this business of "maintaining profit margins". [I'm getting OT by going here so feel free to ignore me. It's just that I have this overwhelming need to rant.] I don't know about any one else's "profit margins" but mine aren't doing so well these days. So if the investors, boards, upper management can't maintain "profit margins" at last year's level well, neither can I. And many other folks as well.

              I could go on but you get the idea.

              1. re: Tyrone Slothrop

                I hear what your saying but the other side of that coin is that lower profit margins, or even no profit margin = layoffs/downsizing/restructuring or what ever fancy label they want to put on it.

                I'm not sticking up for corporate greed, or even personal greed, but the bottom line is if companies aren't making money, they go out of business which means loss of income on a much wider scale. This particular producer employees 100,000+ people.

                Do I like paying more for my chicken or butter or lettuce or whatever - NO, of course not. But in the end, I'm going to end up paying even more for it by supporting an even more deflated and failed economy.

                Assuming I keep my job....

                Another point to consider - chickens, butter and the like are commodities. Commodities by definition are products that are in constant demand.

                Imagine the global impact if a major commodity supplier for any given product were to go out of business (eg. oil).

                1. re: chicaraleigh

                  no, no, no.... I didn't give enough emphasis to the meaning of "profit MARGIN". I'm not suggesting that anyone lose their job, quite the opposite. If the investors expect a 20% return on capital, well for now that's going to be 10%. Hopefully no one has been laid off. It is exactly the problem of investors and upper management requiring "sufficient" profit margins that is part of the credit flow problem.

                  There's also the problem of prices are "sticky when coming down, not so when going up".

                  1. re: Tyrone Slothrop

                    >>It is exactly the problem of investors and upper management requiring "sufficient" profit margins that is part of the credit flow problem.<<

                    uh, no. it isn't.
                    without profits, companies go down. they don't hire any more people. they don't supply any more goods. they don't buy any more from suppliers. they don't pay any more taxes. their investors (from all over the economic spectrum, directly and indirectly) get no more dividends or capital gains, and thus don't spend that money -- to buy food, clothes, gifts, cars, houses, tuition, donate to charity....

                    and any investor can expect any profit margin he wants. corporations are not in existence for your pleasure or the "benefit of society," but for the benefit of the shareholder. period.
                    shareholder doesn't like what happens? he can sell his interest or mount a challenge to the board. anyone else doesn't have to buy the product if it isn't priced to his liking.

              2. re: chicaraleigh

                I've never had, ...chicken tenders, frozen breasts, pre-marinated chicken parts..."

                1. re: Sam Fujisaka

                  \you should totally endorse pre-marinated, pre-fried, pre-cut chickens to save the food industry. i mean, really, as a well known cartoon star, isn't it your duty?

                2. re: chicaraleigh

                  I'd say that's a very good point; but butter? As you say, butter is a commodity, and I can't see how that would be affected to the point it costs twice as much to produce. ANd bear in mind, as long as butter is produced in England (it probably is) transport costs aren't going to be massive. You already have the cows, you just have to feed them grass, which is free.

                  1. re: Soop

                    well, I'm not an authority on dairy farming but, I'd venture to guess that there are materials that must be purchased to sustain the cows (hay, grains, medicine, etc), there is also a cost for extracting the milk which must use some sort of power, the cost to process the milk into butter must cost more, and then finally transportation.

                    I'm just guessing here...