July 9, 2020

Butter Imports Fill Gap in Domestic Supplies

 |  By: Fran Howard

The butter market has been anything but typical since the novel coronavirus was first confirmed in the United States in January. While grocery sales have been soaring, dramatically reduced restaurant orders mean that butter once destined for foodservice now has to be further processed for retail.

As consumers continue to pile butter into their grocery carts, U.S. butter makers have been challenged to keep grocery store shelves stocked with product, according to Sarina Sharp, analyst with the Daily Dairy Report. “Butter imports have moved in to fill the gap, and imports are off to a blazing start this year due to a surge in shipments in April and May,” Sharp says. 

The United States imported 12.3 million pounds of butter in May, the second-largest monthly volume on record and 27.7% more than in May 2019, according to data from the Global Agricultural Trade System (GATS). For the first five months of 2020, the United States imported 34.6 million pounds of butter. While that’s still shy of last year’s record-setting 40.5 million pounds, it’s up nearly 39% from 2018 and sharply higher than the typical January through May total, Sharp notes.

“Processors churned out butter in bulk this spring to get as much cream through their plants as possible,” she says. “In April, U.S. butter production surged and then topped monthly records in May.” For the first five months of the year, Sharp notes that U.S. butter output climbed 8.1% above the comparable period a year ago and was 5.9% greater than 2018’s previous record-breaking production. 

“While there ought to be plenty of domestic butter to satisfy demand, a mismatch exists between U.S. butter supplies and consumer needs,” she notes. “With foodservice collapsing, a much greater share of U.S. butter must be further processed into retail-friendly packaging.” And that takes time and requires equipment.

In recent weeks, scanner data showed retail butter sales were still running 30% higher than last year. “As U.S. processors rush to cut and wrap bulk butter into sticks for retail, Europe’s dairy industry has been only too happy to fill the gap, and consumers are clearly willing to pay the higher price for what some view as a premium product,” she says.

Butter from the EU-27 and United Kingdom combined accounted for nearly 90% of all U.S. butter imports in May, and Ireland, which makes the popular Kerrygold brand, supplied more than 85%. “Europe’s commanding share of the butter market was surprising given recent tariffs,” Sharp says. Since mid-October, butter imports from every European nation except France along with cheese imports from Italy have been assessed a 25% tariff, implemented to punish Europe for what the United States alleges are illegal subsides given to aircraft manufacturer Airbus. 

“Initially, the tariffs slowed European butter and Italian cheese exports to the United States, but the United States stepped up imports of European butter as the pandemic began to reshape consumer habits,” she says.