The Great French Butter Crisis of 2017

Another entry into the anecdata bank convincing us that the last Frenchman who understood economics was Frederic Bastiat. France is suffering from a butter shortage, the croissant makers just cannot get enough of the stuff, the supermarket shelves are empty.

Quite why doesn't particularly matter - whether demand has risen or supply fallen doesn't make a difference here. What does matter is the reaction so far:

French consumers have not yet seen butter prices rise at the checkout because supermarket groups fix their prices once a year.


Which is, of course, to entirely miss the point of a market economy with a price system. To be able to vary prices so that supply and demand match.

All that is necessary to end the Butter Crisis is for the price of butter to change. On the commercial and wholesale side this is happening, industrial supplies have had price movements. But for something like butter retail demand is an important part of the whole. So, what happens if that retail price doesn't change? Well, facing those higher wholesale costs the supermarkets aren't exactly going to rush out to purchase stocks. Nor, given the higher prices available elsewhere will producers produce retail sized portions, will they? 

Further, facing no price rise themselves consumers won't substitute away from butter. Off to lard, or goose fat, margarine, or even allow that toast to go commando under the confiture.

When either supply or demand change it's entirely madness not to allow prices to change, for the point and purpose of the price system is to balance supply and demand as they change.

What the heck are they using as economics textbooks over there?