Economic analysis

Norway’s butter bailout

A severe shortage of the fatty dairy product is encouraging liberalization–and smuggling

Heiko Junge/AP Photo

It was Saturday night, the week before Christmas, and two Swedish men were driving over the border to Norway. With them, in their small van, they carried more than 500 packets of butter—for a total of 250 kg—which they hoped to sell for more than 62,500 Swedish krona (CAD$9,187), according to Norwegian police.

Like countless profiteers before them, the two Swedes were trying to take advantage of the scarcity of something in high demand. In this case, it happened to be butter.

Norway, it turns out, is in the midst of a severe shortage of the fatty dairy product. Over the holidays, butter prices in the Scandinavian country spiked. Shoppers frustrated with store shelves devoid of butter took to the internet, where a one-lb. stick would sell for as much as $465.

The butter crisis—which is expected to continue well into January—has been blamed on low dairy production last year due to spells of unusually rainy weather that spoiled animal feed and cut domestic milk output by 25 million litres. Many have also pointed to an unexpected spike in demand for butter, thanks to a trendy high-fat, low-carb diet that swept the nation last fall. “Sales all of a sudden just soared, 20 per cent in October then 30 per cent in November,” Lars Gatlung, head of communications at Tine Norwegian dairy cooperative Tine told Reuters. “Norwegians aren’t afraid of natural fats, they love their butter and cream.”

The butter shortage has encouraged many Norwegians to speak out against the country’s import tariffs and quotas, which have for decades sheltered Norwegian dairy producers from foreign competition. In response to the shortage, the government plans to slash tariffs by more than 80 per cent by March.

Meanwhile, Tine (pronounced “tee-nah”), which controls more than 90 per cent of the country’s butter market, has been targeted for mismanaging Norway’s butter supply. Critics contend the cooperative has a virtual monopoly on the domestic butter industry, and blamed it for creating the crisis by failing to import more butter to make up for a poor production year. “It’s clear that the (Norwegian regulation) system hasn’t functioned well enough,” Lars Tretteteig, CEO of dairy company Sinnove Finden told the Dagens Naeringsliv newspaper. “This is not how the market should function.”

According to Swedish English-language news site The Local, markets near the Sweden-Norway border are selling up to 20 times more butter than usual as Norwegian customers pour into their neighbour’s territory to stock up. As for the Swedish butter smugglers, they were apprehended by police shortly after arriving in Norway. Their 250 kg of butter was destroyed at the border–much to the chagrin of butter-craving Norwegians.

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