CLAIMS have been made that there could be a shortage of butter and cream this Christmas if bulk costs of the products are not supported by consumer costs.

Dairy giant, Arla, made the claim, and chief executive of the farmer-owned firm, Peder Tuborgh, said the shortage had come due to a number of milk producers decreasing their volume of milk production, in 2016, due to previous overproduction, which led to poor milk prices.

Mr Tudborgh also added that consumers would see a price rise on the products in the coming months, and that these would vary in different European nations, although he could not predict what these price increases would be.

Speaking on behalf of the Agriculture and Horticulture Development Board, dairy lead analyst, Chris Gooderham, commented: "Bulk prices for butter and cream are currently at record high levels. 

"Consumer prices have not yet reacted to those record prices. 

"Generally, consumer prices tend to be less volatile than the bulk traded prices. 

"However, if bulk prices stay at such high levels, consumer prices will have to react otherwise butter and cream will be diverted to bulk sales instead of retailer products.

"Overall, the amount of butterfat that is sold as either retail packs of butter or potted cream is small compared with the total amount of product produced. 

"Most of the butterfat ends up in food manufacturing, such as bakery. 

"It is worth noting that the manufacturers of these products will be exposed to the high butter and cream prices, too, and there will be upward pressure on the consumer prices for these other products containing butterfat as well."

In response to Arla's claims, NFU Scotland policy manager, George Jamieson commented that dairy farmers should not have to bear the burden of these shortages, and added: "The potential shortages of butter and other dairy products comes as no surprise, as we have evidence to suggest that some supermarkets are already rationing butter.

“Dairy commodity prices have been rising dramatically since last summer, illustrated by the objective market indicators AMPE and MCVE, which reflect the wholesale price of butter, SMP, and cheese and cheese by products, respectively.

"These have risen by 17 ppl, while farm gate has risen by 7ppl. 

"This clearly is not reasonable."

Mr Jamieson went on to explain that consumer prices must reflect these bulk price increases, and that dairy farmers must be able to trust that the supply chain will support them and their businesses, and added: "The challenge of volatile markets is very clear, but equally clear is that the primary producer is carrying the risk on behalf of the supply chain, including the consumer. 

"The supply chain must work together to resolve this as farmers who have faced unprecedented losses over the past two years will lose faith due to an inability to plan ahead nor have any faith in investing for the future, even those who can raise the funds.

“It is fundamental to build trust, introduce much better contracts, pricing and volume transparency, and obtain longer-term planning across the supply chain. 

"We need much smarter mechanisms that treat the primary producer as a valued partner, who like processors and retailers, need as much business certainty as can be achieved."

He explained that dairy farmers are fed up with a "simple lack of fairness" and a "lack of respect" from the dairy industry, and continued:

"In a country so exceptionally well-placed to produce milk, it is shameful that the dairy supply chain and government cannot develop constructive solutions, beyond farmers taking the hit every time the going gets tough.

“NFU Scotland working in closely with other UK farming unions is calling for urgent action on price and volume reporting, transparency, contracts, pricing, risk management, and the Groceries Code Adjudicator to deliver a modern, efficient, progressive dairy sector, rather than the almost feudal nature of the current model, which relies too much on the assumption that dairy farmers will carry on regardless.”