Butter Illustrates a Dependent Demand Shortage

Staffing issues and lower milk production in the first half of the year have led to a dairy shortage, resulting in less butter on store shelves and in storage facilities.

Butter prices increased 28% from January 2022 to September 2022. Factors leading to the increase in costs of food production include severe weather and the Russia-Ukraine war.

Video Spotlight:  

• Butter supply shortage leads to spike in prices  (Sep 27, 2022, CBS Philadelphia)

This post is based on the WYTV article, Butter shortage: How the holiday baking season could be affected, by Laura Morrison and Addy Bink, September 27, 2022; the CNBC article, The price of butter is sky-high and ‘not going to come down,’ says supply chain expert—here’s why, by Aditi Shrikant, October 5, 2022; and the YouTube video in the Spotlight. Image source: ©FoodCollection

Discussion Questions:

1.  What are the challenges in butter inventory management facing the dairy industry, given staffing issues and lower milk production?

Guidance: Because of staffing issues and lower milk production, the dairy industry faces two challenges in reaching the goals of effective butter inventory management: keeping butter prices from going up and store shelves from running low.

2. How does the demand for butter illustrate the concept of dependent demand?

Guidance: The demand for butter is an example of dependent demand because butter is one of the major ingredients used in the production of baked goods.  In other words, the total quantity of butter needed during any time period depends on the amount of baked goods that will be made.  Consequently, as the holiday baking season approaches, the demand for butter is expected to rise.