Butter Prices Much More Settled This Year

July 29,1999

Compared to the wild price fluctuations of 1998, wholesale butter prices this year have been more moderate and predictable through the first seven months of the year, says the American Butter Institute. One factor absent from this year's market is the influence of adverse weather that characterized 1998 production.

ABI notes the extremely wet weather last year in California, the nation's top butter producing state, caused serious problems with the milk and cream supplies used to produce butter. Weather problems affected supply while at the same time strong demand for other products that use cream created a supply-demand imbalance that pushed prices to "unprecedented levels."

Butter prices have been increasingly volatile since the early 1990s, due largely to the diminished presence of the federal government's price support program which had helped stabilize butter prices at the wholesale and retail levels. In 1998, the wholesale price, established at the Chicago Mercantile Exchange, ranged from a low of $1.13 per pound in January to a high of $2.81 in September, a record high wholesale butter price.

This year, however, the wholesale butter price has reached only the $1.51 per pound level during a three-week period in May and June and now stands at $1.35 per pound, ABI points out. The average wholesale butter price this year has been $1.26 per pound through July 30.

"Butter producers have had a much calmer year so far in 1999," says Jerry Kozak, ABI executive director. That's a sign "that the marketplace is working to balance supply and demand."