HELP could be at hand for food firms faced with a butter shortage and soaring prices as a support scheme funded by the Scottish Government steps in to find ways to tackle the problem.

The shortage has been caused by milk producers cutting back on production after a long period of oversupply.

That in turn has led to less milk being available for butter manufacturers, and the knock-on has been a shortage of butter and big price hikes, Scottish shortbread makers, confectioners and bakeries, who all traditionally use a lot of butter, have been fearing problems which are expected to hit in December, in time for the Christmas food production rush, as the shortage trickles down the supply chain.

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But now the Scottish Agricultural Organisation Society (SAOS) will undertake an urgent feasibility study to explore opportunities for collective buying and storage, to increase market competitiveness and boost sales.

The study will also look at the potential to forecast future market activity to mitigate the effects of volatility on the sector. The work is being delivered through the Market Driven Supply Chain (MDSC) project, announced in March and funded with £1 million of Scottish Government cash. At the RBS Food and Drink conference, Scotland’s Rural Economy Secretary Fergus Ewing said: “Our food and drink industry is a significant and growing part of our economy and we want to support our manufacturers to compete in global markets – particularly during times of economic pressure.

“The price of wholesale butter has doubled since the start of the year, and is at a record high. This is a concern for many of our smaller food and drink manufacturers who use butter as a primary ingredient, such as our shortbread and confectionery producers and bakeries, and who are finding trading tough.

“We have listened the concerns of our manufacturers and this urgent feasibility study will explore opportunities to exploit buying and efficiency savings made available through collaboration, boosting productivity and competitiveness within domestic and global markets.

“We expect to see the outcome of the study within the next month or so and we look forward to supporting the industry in whatever way we can."

Fears where first raised over butter supplies in July after the boss of dairy company Arla predicted a fall in milk production last year. The chief executive of the firm said the shortage would arise because producers have “put the brakes on” after a period of over-production and lower prices, in an attempt to balance out the dairy industry, and noted a steep rise in the cost of butter.

The MDSC project was launched to support food and drink supply chains to fully exploit opportunities in UK and international markets.

The project is funded by Scottish Government, Scottish Enterprise and Highlands and Islands Enterprise. It is managed by Scottish Enterprise and delivered by SAOS.

The first phase of project (2014-17), delivered 33 projects and generated more than £20m of efficiency gains and added value sales growth in UK and international markets.

Phase 2 will develop the capabilities of 20 food and drink supply chains to deliver an aggregated increase in turnover of at least £24m by 2020.