The U.S. butter market is being driven by the world market price and the exchange rate this year. In most years the U.S. can't compete with the world butter market without federal assistance. This year there is a worldwide shortage of butterfat which has led to an abnormally high world market price of $1.85/lb, which is usually around $1.00 - $1.20/lb.
Two weeks ago there was a nice drop in butter price, following an increase in the strength of the dollar. This increase has reduced exports and allowed butter producers in the U.S. to increase their inventories. This has helped the overall pricing a little but much of the butter in inventory is at a higher price. Between that and world market pricing pressure I don't expect to see much easing in this market before the end of summer.
MD DA950 NATIONAL DAIRY MARKET AT A GLANCE
June 4, 2010 MADISON, WI (REPORT 22)
CME GROUP CASH MARKETS (06/04):
BUTTER: Grade AA closed at $1.5750. The weekly average for Grade AA is $1.5656 (+.0131).
BUTTER HIGHLIGHTS: Pricing levels at the CME Group cash market continue to increase fractionally on a daily basis. Churning activity over the recent holiday weekend was strong in much of the country, absorbing available cream supplies. Early in the week, butter producers continued to work down weekend supplies of cream and realized lighter offerings as Class II operations resumed cream based product production. At this time of the season, ice cream and mix production are anticipated to absorb increasing volumes of available cream, thus limiting supplies for butter producers. Domestic butter producers and handlers are very interested in what impact the release of European butter stocks from intervention might have on current
and future markets. At the Dairy Commissions meeting on June 3, the Commission did accept bids to sell 11,515 MT (25.4 million pounds) at prices ranging 3450 - 3850 Euros per MT ($1.9000 - 2.1200 per pound). These prices are in line or slightly lower than current selling prices in Europe at this time. Reports indicate that there are 13,669 MT left for bidding by the June 15th deadline.
APRIL DAIRY PRODUCTS (NASS): Butter production was 138.6 million pounds in April, 2.5% below April 2009 and slightly below March 2010.