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Business

Butter shortage pads prices in Japan

TOKYO -- The price of commercial butter has hit a 29-year high as business users rush to build inventory ahead of winter, a trend exacerbated by Japan's state import system.

     Prices of butter used by snack makers hit roughly 570 yen ($4.58) for 450 grams in Tokyo at the beginning of June, the highest since March 1986. The retail price of butter in Tokyo is near an all-time high, around 430 yen for 200 grams. Prices of nonfat dried milk, used in coffee creamer and other products, also are trending in high ranges.

     Japan's domestic butter stock totaled 18,000 tons at the end of the last fiscal year in March, slightly under the 20,000 ton threshold considered appropriate. Demand typically peaks in winter, when butter is used in stews, cakes and other heavy foods, but some food producers have begun stockpiling commercial butter for this coming winter, tightening supply.

     Butter production is often secondary to that of other dairy products, such as milk. Hotter than average temperatures this month in much of Japan have many producers expecting demand for milk to rise above normal levels, fueling fears that supplies remaining for butter production will be insufficient. The number of dairy farms in Japan has declined in recent years, so filling a supply gap with domestic dairy is difficult.

     In light of limited domestic supply, Japan decided at the end of May to begin emergency imports of butter, which is subject to government control. Around 10,000 tons are to arrive from Europe and New Zealand by the end of October, and domestic stocks are anticipated to return to the recommended 20,000 tons by winter. Chances to bid on the supply, however, are limited, and competition among food producers to ensure an ample stock is intense, with bidding prices at unusual highs.

(Nikkei)

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