Consumer prices in Poland have stayed stubbornly high through 2024, forcing the government to unleash copious amounts of butter in hopes that it will soften inflation.
The Central European country is selling as much as 1,000 metric tons (or 1 million kilograms) of frozen butter reserves in an auction announced this week. The auction aims to ease the staple food product’s prices, which have spiked about 40% in Europe this year.
The auction will take place in blocks of 25 kilograms (55 pounds) each for a discounted price of about 28.38 zlotys ($7) per kilogram—at least 40% below in-store prices for unsalted butter, as listed by Polish supermarkets.
The bidding process on the butter reserves will start on Thursday, with individual bids open for at least 20 tonnes, according to the Financial Times. However, the maximum the government would auction is the weight equivalent of an average of 1,000 giraffes.
Releasing additional butter reserves could increase supply and ease prices in the run-up to Poland’s presidential elections in May. The sale could help “stabilize the situation” as the reserves are meant to “maintain the continuity of supplies,” the strategic reserves agency said in a release. It also holds other dairy products, sugar, and animal fats in its reserves.
Other countries have tapped their respective reserves amid shortages to normalize prices, such as Canada, which turned to its stockpile of maple syrup amid a shortage in 2021.
Butter has become a sensitive subject in the region, even sliding into political debates. It also became the object of a heist in Russia’s wartime economy.
Rafal Trzaskowski, the candidate from Prime Minister Donald Tusk’s ruling party, dismissed the Polish central bank’s mismanagement of inflation and joked about sending the governor some butter “so he can see what this success looks like today,” the FT reported.
Poland’s per capita butter consumption has risen over the past two decades. Concurrently, the price of butter has been surging amid milk shortages, a shrinking number of cows, and an uptick in European cattle diseases.
These factors are exacerbated by persistent inflation in Poland, which stood at 4.6% year over year in November. While that figure marked a decline for the first time in eight months, economists see it as a “temporary phenomenon” before prices climb back in December and into the first quarter.
“The drop in headline inflation in November was largely due to statistical factors, and the broader inflationary landscape might still cause concern for consumers, prompting them to be cautious with their spending,” ING Bank economists wrote in a note last week.
Poland has kept its interest rates stable throughout this year as it eased pandemic-era caps on food and energy prices.
Countries worldwide are feeling the pinch of high food prices, particularly as 2024 draws to a close. In Europe, the holiday season is expected to witness elevated costs, as sugar, chocolate, and butter prices soar amid increasing demand.
Food prices illustrate the challenges people will face next year, especially as major governments tighten their stance on interest rate matters.
Take the U.S., for instance. This week, the Federal Reserve slashed key interest rates for the third time in 2024 as inflation cooled in response to two years of high rates. However, the expectation for similar cuts next year has been lowered.
The story is slightly different in Europe, where the European Central Bank has cut rates four times this year. At least four more rate cuts could follow in 2025, although major political events in the region and across the Atlantic might impact those plans.
