Some prices in the dairy industry have effectively doubled since Jan/Feb 2007. As the bakery sector approaches its busiest time of year, dairy supplies have become even more scarce, exacerbated by the seasonal decrease in milk supply.

Butter from Eastern Europe, New Zealand, Australia and even the US has been imported to plug inevitable gaps in UK supply, but this appears to now be drying up.

No doubt there will be some UK product supplied through the autumn period, but uncertainty over milk supply only serves to prolong strained availability.

Private Storage Butter (stocks put aside from the first half of the year) is now available, but UK stocks are insignificant. It should also be remembered that there is zero butter available from intervention stocks this year to supplement availability (against 50-60,000 tonnes sold across the EU in the same period in 2006).

World demand for dairy products remains high although at this time of year is being served mainly by southern hemisphere sources. When the seasonal switch to northern hemisphere origins starts to come back in the first quarter of 2008 there will be much debate as to whether the current high prices within the EU will deter international buyers.

It remains to be seen how much, or little, is sold on export markets, so predicting prices for the first quarter of 2008 on all dairy commodities is very difficult indeed. However, the demand will definitely be there.

August update from Gary Norcott, commercial director of Staple Dairy Products