Last Friday (October 6, 2023), the price of US butter reached a new record at $7.722 per ton, while Milk prices remain lower compared to 2022. The rapid rise in butter prices is driven by strong domestic demand that is depleting stocks. According to US analysts, the increased consumption may not actually reflect a higher use of butter in diets but rather the need to replenish restaurants and supermarkets’ refrigerators that did not stock up due to last year’s high prices.
Another significant factor contributing to the rise in butter prices is the slowdown in Milk supply coinciding with the seasonal low, leading to a decrease in butter production in August. The production slowdown has been influenced by a reduction in the number of dairy cattle, likely due to slim margins for farmers, which necessitated government margin compensation payment (Dairy Margin Coverage Program) for the eighth consecutive month, from January to August. However, the high butter prices are exerting an upward pressure on milk prices at the farm, especially for Class IV milk (intended for powder and butter production).