Butter Rallies Again
U.S. butter stocks totaled almost 314.4 million pounds last month, according to USDA’s Cold Storage Report released earlier this week. Stocks plummeted 20.7% vs. July 2021. Butter levels have traditionally fallen from June to July, but this year’s drop of 16.5 million pounds was much larger than the five-year average decrease of 5.4 million. This year’s July inventories were the lowest for July since 2017.
CME spot butter markets have stayed at or near $3.00/lb. since early June. On August 3, the market reached $3.06/lb., the highest price since 2015, then took a brief reprieve to bottom at $2.935/lb. on August 12. Since then, markets have bounced back, closing at $3.00/lb. today. Trading has been active, with 48 car lots trading last week and 27 loads so far this week.
Dairy Market News reports cream multiples around the country on the rise. Some butter manufacturers are selling cream loads rather than using them to make butter. In the Midwest, cream multiples reflect a climb to a seven-year high, evidence of exceptionally tight butterfat supplies. The cream market’s transportation issues range from a driver shortage to high freight costs, making it challenging to move excess milk and cream to where it’s needed. Cream demand is steady domestically and strong internationally. DMN West Coast contacts share that retail and food service demand is strengthening. June butter exports of almost 13 million pounds are nearly 60% higher year-over-year and up 24% year-to-date compared to the same period in 2021. Through June, the U.S. is a net butter exporter by 17 million pounds.
The increased price suggests demand is rising, supply is tightening, or both. Evidence from the industry and USDA data indicates both are occurring. Fall and winter are primetime for butter consumption as bakers make buttery holiday treats. With the current marketplace dynamics, there are concerns stocks will be tight during the key baking season, leading to persistently high butter prices.