Butter Prices: What Goes Up, Must Come Down
Commodity Broker at AgDairy LLC
The crazy aspect of the butter movement was not a concern over a butter shortage this year as was prevalent in 2022. Exports continued to suffer in comparison to 2021 and early 2022. Butter exports in September totaled 2,294 metric tons, down 46.4% from September 2022. To make matters worse, September 2022 exports were 35.5% lower than September 2021.
This is the lowest September exports have been since 2020 and the lowest monthly volume of butter exports since November 2020.
Domestic butter demand was improving as the second half of this year unfolded which increased the desire to buyers to purchase supply ahead of time. Butter production has also been slower and cream supplies were tighter and churning was reduced. The anticipation for higher prices became a self-fulfilling prophecy as buyers turned more aggressive. Once the buying frenzy was finished, sellers turned more aggressive wanting to move high priced supply as quickly as possible resulting in a leap-frog effect to the downside. It is uncertain how much further prices will decline, but it is another classic example of a market always falling faster than it gains.
Not only are we dealing with lower milk prices and lower demand fluid milk consumption, but schools are also now facing a milk carton shortage that could last from a few weeks to several months. Apparently, the demand for half-pint milk cartons is significantly higher than expected according to Pactiv Evergreen, the leading manufacturer of milk cartons for North America. The immediate impact will be felt in the states of New York, Pennsylvania, California, and Washington. School officials are scrambling to find alternative choices rather than cartons or limiting choices for milk. Not only are schools impacted but hospitals, nursing homes, and prisons may also be affected. I cannot understand how demand for half-pint carton for milk can be significantly higher than expected. There has not been a surge in fluid milk demand from schools or other institutions that I can see from fluid milk sales statistics. It seems it might have been a matter of this main company not being able to supply their customers requiring them to shift to other companies for supply or for alternatives. It certainly is an interesting marketplace.
