Consumers have increased purchases for five straight years, while margarine sales dropped, according to researcher Nielsen NV. The gains left US stockpiles in July 42 per cent lower than a year earlier, USDA data show. Tight butter supplies are contributing to higher costs for buyers including Panera Bread.
"Ultimately, there's good demand for cream-based products that's tightening up the market," Dave Kurzawski, a Chicago-based senior broker at INTL FCStone, said in a telephone interview.
"We haven't had a tremendous amount of milk to deal with either, and the quality of fat in milk has gone down."
Butter futures for October settlement climbed 1.1 per cent to $2.55 a pound at 11:12 a.m. on the Chicago Mercantile Exchange, after touching $2.5500002, the highest ever for a most active contract. The commodity is up 62 per cent this year.
US prices are higher than those from other producing nations, signaling American shipments will slow. Butter is averaging $2,985 a metric ton ($1.35 a pound ) in New Zealand, the world's biggest exporter, the USDA said yesterday.
"We have a gaping hole with where US prices and where world prices for fat are," Kurzawski said. "That's going to have to close at some point."
- Bloomberg
