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Butter Tops $2

December 9, 2021

From 2016 to 2019, the U.S. churned less butter than it consumed and filled in the gap with imports. Last year, butter output surged during the height of the pandemic, and 2020 production topped domestic demand. Nonetheless, the U.S. once again imported more butter than it exported last year, which added to the U.S. butter stockpile.

But 2021 is different. The U.S. is exporting butter and milkfat at the fastest rate since 2014, resulting in nearly flat net butter trade so far this year. Exports are large enough to offset most imports, so foreign butter is adding very little to the overall U.S. butterfat supply. Domestic butter production is down from 2020 levels while demand continues to rise. Butter inventories have not been tight by any means, however.

Formidable output boosted stocks to burdensome levels early this summer. The butter stockpile topped 400 million pounds in May and June, when cold storage warehouses contained the largest U.S. butter inventories since 1993. But inventories have decreased quickly. Manufacturers moved 133 million pounds of butter out of cold storage from July through October, the fastest drawdown for that period since 2013. Butter stocks continued to tighten in November and may have continued to do so into December, thanks to strong holiday demand and low churn rates.

U.S. butter exports are likely to remain high because international prices are holding above U.S. values. CME spot butter stands at a two-year high. The fundamentals suggest butter values will remain lofty into the new year.



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