Butter prices have fallen to their lowest level since November 2021, dropping to $1.96 1/2 per lbs. on the close of Wednesday.
Ever.Ag dairy analyst Katie Burgess says the sharp decline raises key questions: Why are prices falling at a time when demand typically increases, and could consumers see more aggressive grocery store promotions heading into the holiday season?
Burgess says the collapse is largely driven by record-high butterfat levels on U.S. dairy farms. Advances in genetics and nutrition, such as improved genomic testing and specialized feed, have boosted the fat content in milk. This has led to an abundance of cream and, in turn, a surge in butter production.
With bulk butter supplies swelling, prices have sunk to four-year lows, an unusual trend for late summer when prices typically rise.
“In a typical year, you tend to see the price for bulk butter spike in September and October, right as we’re heading into that holiday baking season,” Burgess explains. “So this year is definitely a bit of an anomaly.”
While the dip is concerning for dairy producers, consumers may benefit if retailers roll out more aggressive butter promotions for holiday shopping.
“Lower butter prices today potentially could result in more aggressive promotions later on,” she explains. “Thinking back about the dairy producers, we have seen that in some years past, if all of a sudden we can spur some extra consumer demand for product over the holidays, that potentially could give us a rebound in prices at the farm level.”
Internationally, U.S. butter is the cheapest in the world, fueling exports that recently reached their highest level since 2014. But international butter prices have started to move lower, too, Burgess says.
“EU butter prices are down 12 percent over the past three weeks in USD terms,” she says. “So, while international prices are still (more than) $1.00 higher than U.S. values, the fact that they are moving lower seems to be pressuring the U.S. market too.”
