How Long Will Butter Remain Rangebound?
Butter price certainly has been unexciting, lacking volatility since the beginning of the year. It is not the first time the butter price has remained locked in a sideways range for an extended period. Generally, price will trend one way or the other or show significant volatility. However, when supply and demand are closely aligned, there is little reason for price to move very much. Buyers and sellers then become comfortable taking care of business without fanfare. We have seen butter price remain in a price range from a low of $2.2675 to a high of $2.4650 since December 23, 2022. Churning has been active with supply readily available for demand. The last time the market remained in a range for an extended period was August 16, 2018, through May 10, 2019. Price ranged from a low of $2.19 to a high of $2.34 during that period (see charts). It is hard to believe that less than a year ago, there was concern over a butter shortage resulting in price moving to a new high before the industry and traders realized that was not going to be the case. Once the fear of a shortage evaporated. The market spent the next three months trying to find a bottom and once found, resulted in the current sideways pattern.
By ROBIN SCHMAHL
June 16, 2023