2009 butter prices were relatively lack luster until the end of the year. AA Butter price increased from the $1.20s to 1.47/lb in late December. This price has eased slightly to low $1.30s. This follows the trend models over the last several years.
Going forward I expect butter prices to be higher than last year, how much I'm not sure. Nationally we are in good shape with feed prices coming down and a strong supply of cream. Internationally the world price of butter is higher than domestic butter, which is a rare occurance. One of the driving factors is that "Milk production in the Oceania region is now on the down side in both Australia and New Zealand. Milk handlers in New Zealand have reduced their overall production projections to be more in line with a 1 - 1 1/2% increase over last season versus the 2 - 3% higher projected earlier in the season.
Australian milk production figures for October were recently released and indicated that output for the month was 7.4% lower than October 2008. Output for the month in Victoria was down 9.8% with Tasmania trailing last October by 5.3%. Cumulatively, milk production is trailing last season by 5.0% for the first four months (July - October) of the year. Although official milk production data is not available for November yet, milk handlers are projecting that output for November will probably be much like the 7% decline recorded in October. Milk handlers are stating that they had hoped that the peak, lower than projected, would have held steady longer before starting to decline. As milk volumes edge lower, manufacturing plants are juggling milk volumes and directing them to products of most need and best returns.
Some manufacturers and handlers state that there are supply gaps in basically all manufactured dairy products, but they are trying to fill those gaps with available milk supplies. Some handlers are looking to outside sources to supplement local stocks."
Going forward it is a wait and see game. The market does not yet have a clear direction.