Lowest Seasonal Butter Prices Since 1996 Expected This Year

October 26, 1999

The lowest seasonal butter prices since 1996 should greet consumers who will be doing their own holiday baking. The wholesale butter price, which as recently as last year reached a record $2.81 per pound at the Chicago Mercantile Exchange, has declined below $1 a pound for the third time this year.

On Oct. 20, butter sold for 97.5 cents per pound at the CME. This time last year, the butter wholesale price was $2.33 per pound. Butter prices haven't been this low seasonally since November 1996 when they traded around 74 cent s per pound.

Jerry Kozak, executive director, American Butter Institute, said that "unlike last year, when bad weather cut supplies short, milk production on the farm has been much stronger in 1999. Greater production ultimately means lower wholesale prices for most dairy related items like butter and cream. So the good news for consumers is that they should see significantly lower prices this fall for butter, assuming retailers pass those cost savings along to shoppers."

Butter prices have been increasingly volatile since the early 1990s, largely due to the diminished presence of the federal government's price support program which had helped to 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 per pound in September – still the all-time record wholesale price for butter.

In 1999 the wholesale butter price peaked at the $1.51 per pound level during three weeks in May and June and now hovers around the $1 per pound mark.

Many of the factors leading to recent price volatility have faded, according to the ABI.. Last year, extremely wet weather in California, the nation's number one butter producing state, caused serious problems with the supply of milk and cream used to produce butter.

"This year, the supply-demand situation is much more closely in balance," says Kozak. "Nationally milk production is up more than 3% through September, meaning that cream supplies are more plentiful than last year. Consumers this year should be benefitting from more stable retail pricing, although not all of the price reduction at the wholesale level has shown up on the supermarket shelf."