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A sign on a fridge inside a grocery shop in Oslo reads: "We are sorry for the temporary shortage of butter"
A sign on a fridge inside a grocery shop in Oslo reads: "We are sorry for the temporary shortage of butter"

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Churn, baby, churn: Norway butter shortage spurs turmoil Add to ...

These are stories Report on Business is following Wednesday, Dec. 14. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.

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Churn, baby, churn They take their butter seriously in Norway, where it's a big industry, with added importance in the holiday season.

A butter shortage has prompted the government to slash import tariffs dramatically, by up to 80 per cent, The Associated Press reports today, and at the same time remove milk quotas for dairy farmers.

Norway, the news agency says, is keen on fat-rich, low-carb items, and stores have run out of butter despite the fact that the country's largest producer laid on more than 1 million kilograms extra this year.

“It's really stupid because I just want to bake for Christmas,” one woman told AP reporter Nils Myklebost. "But I guess it's no crisis really."

The lust for butter isn't only affecting Norway. A major Swedish supermarket group with stores near the border have sold 25 tons in the last two weeks alone, while a TV show in Denmark gathered 4,000 bricks to ship north.

And, of course, there's an underground economy amid the shortage. A smuggler with 90 kilograms in his car was arrested crossing from Sweden last week, the news agency said, while butter is going for the equivalent of about $32 (U.S.) a pound online.

Markets troubled Europe's deepening troubles, coupled with the lack of action yesterday from the Federal Reserve, have sent stocks, commodities and the euro tumbling today.

Gold sank below $1,600 (U.S.) an ounce, the euro temporarily fell to an 11-month low below the key $1.30 mark, and oil slipped.

Not that anyone had believed that the debt crisis in the 17-member euro zone was easing, but a debt auction in Italy, with a high yield averaging 6.47 per cent on five-year paper, drove home the point.

Adding to the market's angst was the fact that the U.S. central bank's policy-setting panel, the Federal Open Market Committee or FOMC, held the line, announcing no new measures.

"With disappointing progress in Europe, [the euro]has weakened significantly, now well through the psychologically important 1.30. This is weighing heavily across asset classes," said senior currency strategist Camilla Sutton of Scotia Capital.

"Negative headlines continued to flood markets today, with uncertainty over how palatable the recent EU summit agreement really is, news that Chancellor Merkel will not support a larger [bailout fund]and the lingering impact of yesterday’s FOMC statement."

Asian and European markets fell, followed in North America by the S&P 500 and Toronto's S&P/TSX composite .

"The gold market has plunged in the course of the past 54 hours and we fear that more such weakness lies ahead," said Dennis Gartman, publisher of The Gartman Letter, who said yesterday he was out of bullion.

"We turned against gold simply because the market was signaling that we should and we listen, as we are able, to the signals that the market sends," he added today. "This time it was sending cautionary signals to us as long-standing gold market bulls … so caution we strongly suggested to our clients around the world. The sidelines beckoned. They are beckoning still."

Where oil is concerned, analysts believe prices could also continue to slip.

"OPEC’s decision to raise the official target for the cartel’s output to close to the current level of production probably had little impact," said Julian Jessop of Capital Economics.

"While we think OPEC’s decision will make no real difference on the ground, the bigger picture is that the latest demand forecasts from both OPEC and the [International Energy Agency]still look too high and that oil prices have further to fall. We continue to expect the price of Brent crude to drop back to around $85 per barrel by the end of 2012.

Driving most of the fears in global markets is the continuing debt crisis in Europe, where markets still see a failure to fix the problem after last week's crucial summit of EU leaders.

"The most popular word in Europe is still 'no,'" said foreign exchange chief Kit Juckes of Société Générale.

"No to treaty changes from U.K. Prime Minister Cameron; no to increased [European Central Bank]participation in crisis management from Bundesbank President Jens Weidmann; and no to more firepower for [the bailout fund] from Angela Merkel. No, in fact, to saving the euro."

Underscoring that was the fact that Italy pulled off a bond auction today, with yields on five-year paper at 6.47 per cent.

Where austerity, unemployment lead The accounts from Europe over the past several months paint an ugly picture of life on the streets in an era of austerity and high unemployment.

Social unrest in the form of strikes, protests and riots have become frequent. Suicides have almost doubled in Greece, according to The Wall Street Journal, drugs have been withheld from some Greek hospitals that have missed their payments, emigration has been rising sharply in Ireland, Greeks have been warned to be on the lookout for scam artists, and, in Britain, students have turned to prostitution and gambling.

Life in the Old World in this new era is disturbing, to say the least, notably in nations with surging jobless levels. In Spain, for example, unemployment is now almost 23 per cent. In Greece, it's above 18 per cent. And in Britain, according to fresh numbers released today, it's at its highest level in 17 years, with more than 2.6 million people out of work.

For Europe's youth, the situation is dire. In Britain, where youth programs have been slashed, more than 1 million young people can't find jobs, the highest on records that began about a decade ago.

Today, the Reuters news agency looks at the toll in a disturbing article that tells of young Britons have embraced prostitution and gambling, and taking money for clinical trials.

The English Collective of Prostitutes, an aid group, told the news agency the number of people looking for its help has doubled over the past 12 months as students turn to alternatives.

“In some cases that’s sex work, but we’re also hearing about clinical trials, gambling ... dangerous work where there’s very little, if any kind of employment rights,” an official of the National Union of Students told Reuters.

Agrium boosts dividend Canada's Agrium Inc. today boosted its dividend and unveiled an expansion at its Vanscoy operation in Saskatchewan.

The agriculture giant said it quadrupled its semi-annual common share dividend to 22.5 cents, up from 05.5.

At the same time, Agrium said it plans to expand annual production at Vanscoy by about 50 per cent, or 1 million tonnes, when the project is completed by the second half of 2014. It pegged the cost at about $1,500 a tonne.

"We are confident we can achieve our future growth objectives while at the same time providing a higher dividend to shareholders," said chief executive officer Mike Wilson.

Analyst John Hughes of Desjardins saw both announcements as positive, estimating that about 15 per cent of Agrium's operating earnings this year related to potash sales, or $1.12 (U.S.) a share of the $7.48 in the first nine months.

Still, Agrium's moves come amid what UBS Securities Canada says is a dimming outlook for potash prices.

Only late yesterday, UBS analyst Brian MacArthur slashed his price targets on shares of both Agrium and Potash Corp. of Saskatchewan .

"Fertilizer bulk buyers have become increasingly more cautious of pre-buying and holding large inventories over fears of a 'credit crunch,'" Mr. MacArthur said.

"Potash prices stalled in recent weeks and Potash Corp. temporarily closed two mines last week on demand weakness. UBS expects 'last minute' purchasing to be the norm but only in [the first quarter of 2012]"

Mr. MacArthur cut his 12-month target on Potash Corp. shares to $65 (U.S.) from $75, and maintained his "buy" rating. For Agrium, he cut his target to $107 from $115, and also maintained a "buy" recommendation.

UBS cut its price forecast for potash for the 2011-2013 period, and its longer-term projection.

Factory sales decline Canadian industry stumbled in October after three months of gains.

Factory shipments fell 0.8 per cent in October, dragged down by lower sales of petroleum and coal, and losses in the aerospace and parts sectors, which are known to be volatile, Statistics Canada said today.

Still, the $48.7-billion in sales marked the second-highest of any month this year. Having said that, about two-thirds of the manufacturing sector chalked up declines.

"While it's still early days, with important wholesale and retail October data to come, the decrease in shipment volumes isn't bullish for GDP in October," said senior economist Krishen Rangasamy of National Bank of Canada.

"The latter is on track to be the worst month since May. So, after a strong Q3, the expected softening of the Canadian economy in the final quarter of the year seems to be materializing, in line with our call for Q4 GDP growth of around 1.5 per cent annualized."

China shifts policy As Mark Williams of Capital Economics puts it, you've got to read between the lines of today's statement on Beijing's priorities for next year to learn that there has been a shift in policy.

China's Economic Work Conference wrapped up with a plan for "reasonable" growth in lending, controls on real estate remaining, and tax cuts in the pipeline.

Already, China's economy is showing signs of slowing, and the People's Bank of China has eased policy after clearly making gains in its fight against inflation, reducing the reserve requirements, or RRR, among the commercial banks.

So where to from here?

"At first glance, stability is the central theme," said Mr. Williams, the chief Asia economist at Capital Economics in London.

"The government says it hopes to keep growth and prices stable, and policy too. But there are significant changes nonetheless. For most of the last year, officials reiterated that controlling inflation was the primary task. Now, this goal is preceded by the goal of maintaining stable growth. The pledge to keep policy stable is more likely a signal that there will be no loosening on the scale seen in 2008 rather than that there will be no changes at all."

In his view, Beijing must loosen its policy "significantly" next year if it wants to hold growth at a stable level. And looming large is the continuing debt crisis in Europe.

"Exports have barely risen recently and, given the euro zone’s problems, are likely to worsen before they get much better," he said in a research report.

"Within China, there are signs new construction is stalling as property sales have dried up ... Policy loosening is likely to take the form of a larger lending quota and multiple RRR cuts. If the euro zone debt crisis takes a severe turn for the worse, which we think very likely, China’s government would probably cut benchmark interest rates in an attempt to shore up confidence."

Business ticker

In Economy Lab We need to break down barriers to labour mobility across Canada but at the same time we need to foster policies that promote economic growth in all regions of the country, David Campbell writes.

In International Business The Canadian government is considering the extraordinary step of using an act of Parliament to shield the new Windsor-Detroit bridge project from lawsuits launched by owners of an existing crossing, Steven Chase reports.

In Globe Careers A great boss can make you feel engaged and empowered at work, will keep you out of unnecessary office politics, and can identify and grow your strengths. But a bad boss can make the most impressive job on paper quickly unbearable, writes Stephanie Taylor Christensen of Forbes.com.

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