From midnight on Wednesday this week, a 2019-imposed US tariff on Irish butter will be suspended for a four-month period.
The 25% extra trade tariff on EU butter had been imposed by Donald Trump over an airline dispute between the EU and the US.
Kerrygold butter, marketed by Ornua, was hit hard. Over 90% of EU butter sold in the US was Kerrygold butter. The net effect was that Kerrygold butter increased in price on the US shop shelf in late 2019.
However the expected negative impact on sales didn’t materialise as COVID-19 hit and US consumers flocked to supermarkets, so actually Kerrygold sales rose in 2020 despite the shelf price increase.
Speaking to the Irish Farmers Journal, Ornua chief executive John Jordan was upbeat, hopeful the temporary suspension will become more permanent.
He said: “We are only getting detail now on the terms and conditions. There is a lot of product on the market and on the seas so we have to see how it works out. Essentially, there was no margin increase for Ornua or the US retailer, but the price differential moved from $8.47/lb for Kerrygold to $4.50/lb for US butter.”
When asked if Kerrygold was being undersold in the US now 2020 volumes and price were up, Jordan was adamant Ornua was not leaving value behind.
“There is another Irish competitor in the US market selling at 20% less than what we are selling at. We have grown volumes well recently and want to grow volumes further. All you have to do is look at the Irish butter market to see how margins are eroded,” he explained.
Bord Bia figures show the volume of Irish product in the US market has grown from 48.5m kg in 2018 to 54.3m kg in 2019, further increasing to 57.4m kg in 2020.
In volume terms, global sales of Kerrygold butter rose 13% from 2019 to 2020.