Milk price increases have fed through to the supermarket shelf, pushing the cost of our dairy basket to its highest total for more than two years, despite a special offer on Stilton at one major retailer. Butter prices are up more than 30% and milk is 14.3% more expensive than 10 weeks ago, with Cathedral City mature Cheddar and free-range eggs more than 9% more expensive. Daniel Carman, operations manager for the UK's largest independent butter packer, Evan Rees (Butter), said prices have doubled on bulk butter to their highest level in the 20 years that the company has kept statistics. "The bulk price has been changing at an hourly rate and has reached £3.30/kg compared with a retail price of £2.70/kg, which means selling at well below the cost at which we can source raw materials to pack," he said. "The reason is a serious shortage of milk in the UK, as a result of extremely low prices being paid to farmers for years, which forced many out of the market. "The floods in the early summer, the boom in demand from China for a lot of dairy products and the drought in Australia have also played a part." The total basket is up 1.9%, and would have been 3.9% up had there not been a 33% money-off offer on own-label Blue Stilton at Tesco. The basket is now 1.5% more expensive than at this time last year and 0.8% more than two years ago - at exactly the same level as in May 2005. "I can't see dairy prices ever going back to where they were because they were ridiculously low before, and this rise has been a long time coming," Carman added. "The rises need to filter through to retail prices because bulk prices have moved a lot quicker. I think these have peaked now on the bulk side, but retail has to catch up and go that much higher, probably to £3.50/kg for butter."

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