Update on the Japan butter shortage
The shortage of butter in Japan continues: it is still virtually impossible to obtain butter for love or money.
Via a comment over at MR, I found an interesting interview (translated to English) with a Japanese dairy farmer that attempts to explain the situation:
The cause of the shortage, as reported already, is said to be the shortage of milk.
I’m confused by this, because there is no shortage of milk for drinking at supermarkets, and the price of it hasn’t gone up a lot. Is milk used for butter somehow different from milk for drinking?
The consumption of milk has been stagnant, and in 2006 milk was seen being disposed of in Hokkaido. Also, a large number of cows were slaughtered.
The shortage has only occurred in the past 2 or 3 months. Why are events from 2006 relevant?
… because skim milk is produced when butter is made, if powdered skim milk cannot be sold then stockpiles build up, creating a situation in which the quantity of butter produced cannot be increased all at once.
This is interesting. But why not export the excess skim milk powder? I heard there’s a big demand for it in China. Or just incorporate the cost of disposing the excess skim milk powder into the price of butter.
Nowhere does the article mention the massive tariffs on imported butter in Japan. If I am reading the complex WTO tariff database correctly, the tariff is 29.8% on value plus 1,203 yen per kg for butter imports to Japan. Whatever the underlying domestic cause of the shortage, this is surely not helping things.
6 Comments
Ah ha. Fair enough, that explains things a tad.
I still think the point about domestic prices stand, which I guess is what Rodrik is saying too.
It looks like the shortage of milk started last summer.
http://www.cuoca.com/library/items/butter/asahi_news.gif
According to the article, the farmer disposed calves back in 2006 as there was big over supplying of milk, and those calves are supposed be the main supplier of milk today.
In addition of this, the heat wave last summer caused less production of milk, the article said.
CDO: Thanks, that is interesting. I wonder why they chose to dispose of calves rather than older stock? Anyway I still don’t quite understand why there is plenty of milk in the stores but no butter though.
Guess short run and long run means differently in Japanese economics :)
Aaron,
Japanese consumers don’t prefer milk as they believe milk would cause obesity, while they really love cakes, pies, muffins, or whatever that needs tons of butters.
CDO
It is a puzzle. High tariffs imply high local costs and an inability to export surplus skim milk powder (which comes in fixed proportions to butter). But the more basic question is why are these fixed proportions not evident in the market (lots of milk; no butter)? That just defies (my) economic sense (currently).
Is it too heretical/paranoid to suggest that a government with aggresively weightist policies (as in your earlier post about metabolic indices) might have its fingers in this particular mess?