When compared to August of last year, the price of butter went up 24.6%, while the cost of groceries as a whole went up 13.5%.
Cheese, milk, and other dairy prices are also likely to stay high because supplies are tight and demand is high.
The USDA recently estimated that the average price of butter will be $2.88 per pound, up from $1.73 last year. The average price of cheese will be $2.10, up from $1.67 last year, and the price of all milk will be $25.60 per hundredweight in October, compared to $18.53 in 2021.
Peter Vitaliano, vice president of economic policy and market research for the National Milk Producers Federation, said that the whole situation with dairy prices began the summer before.
“Milk production went up by 5% year over year for a while, but then it started going down and went negative,” he said. “When combined with a rise in demand, it drove up the prices of key dairy products, but it took until this year for that to show up in stores.”
Through the week ending September 10, the average price of a pound of butter was $3.08. This was because less milk was being produced, so less of it was being used to make butter and other dairy products.
In August, there were 22% less butter stores (282 million pounds) than at the same time last year. Vitaliano doesn’t think there will be a “butter shortage” this baking season, even though supplies are much tighter.
Vitaliano said, “When you say there’s a butter shortage, I think that means that somewhere in the country, you won’t be able to buy it at the store.” “No, that’s not true. Butter is available. The price has just gone up.”
As milk prices went up, so did the price of most dairy products. In October, the USDA said that the average price of Class III milk was $21.90 per hundredweight, which was $4.82 more than last year, and that the average price of Class IV milk was $24.60, which was $16.09 less than last year.
Record feed prices, problems caused by ongoing drought in many parts of the country, the high cost of replacement cows, and trouble finding farm workers all led to a smaller number of dairy cows and higher prices.
“There are a lot of things that make it hard to increase milk production. We went through a year when farmers didn’t grow,” said Vitaliano. “The price of making milk is as high as it has ever been.”
Recent signs were better, though, as milk production went up 1.6% in August. The average number of milk cows on farms was 9.416 million in July, which was 1,000 more than the month before but 67,000 less than July 2021.
Prices are also going up because dairy products are still in high demand.
“Higher prices have had a small effect on consumption, but dairy is usually not affected by changes in price,” Vitaliano said. “People still buy it when the price goes up.”
The price of a 40-pound block of Cheddar cheese has recently gone down by 12 cents on average.
“For the last few months, the U.S. has been the largest exporting country with the cheapest cheese,” Vitaliano said. “This has led to a big rise in exports.” “I want exports to make up a bigger and bigger part of the total market, which is already getting close to 20% of total (dairy) production.”
