CME Butter Continues to Rise

August 19, 2014 — International butter prices have topped out and are starting to work their way lower, but when is that going to take place here in the U.S.? CME spot butter slipped

Bill Brooks, FC Stone

Bill Brooks, FC Stone

a bit Monday but gained 2 1/2-cents Tuesday to rise to $2.66 per pound

“It’s just a matter of time, unless we see some weather related impact out of New Zealand and Australia,” said FC Stone’s Bill Brooks.  We have a pretty healthy spread between U.S. butter prices compared to international prices.

“It does cause some concern about how low prices will end up either later this year or the end of next spring, as folks bring butterfat into the country to take advantage of difference in prices between our level here and what’s going on internationally,” he said.

Here in the U.S. we are anticipating a growing dairy herd, with more milk per cow expected. Historically, the higher prices climb, the farther we fall, according to Brooks. At the moment, these butter prices have been a boon to producers, pushing the Class I and II prices higher.

Cheese prices are also helping the Class III price. We have seen an inverted spread between the blocks and barrels for nearly two months.

“The block market is more than adequately supplied with fairly heavy trading throughout that period,” Brooks said. “As a result the price has been struggling against the barrel price.”

We have a bit of displacement in the marketplace between the types of Cheddar that is in demand, which has been challenging for the industry to get their arms wrapped around because of the quick shifts we have seen.

“With cheese, we haven’t been that out of line with the international market,” he said. “It’s still essentially a domestically driven market.”

Brooks anticipates less pressure on declining cheese prices compared to what we might expect with butter.

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