Lower milk production on U.S. dairy farms and labor shortages for processing plants have led to tight supplies of butter, sending prices soaring
Fewer cows resulted in less milk for butter churns, which pump out much of their butter in the first half of the year to be stored ahead of strong demand from home bakers during the winter holidays. Milk production through June declined by 1%, a sizable loss compared with the typical 1.
5% and 2.5% annual growth, dairy economists said, though farmers have been rebuilding their herds, boosting milk production since then. In the U.S. dairy industry’s hierarchy, bottlers typically get first dibs on milk, then manufacturers of goods such as ice cream, yogurt and cheese. Much of what’s left winds up in butter, exacerbating the squeeze for butter churns in periods of short supply. That is especially true in recent years as dairy processors have brought new or expanded cheese plants online,Labor shortages have prompted some butter makers to reduce or idle production, according to Tanner Emkhe, an economist at agricultural lenderMarshall Reece, a senior vice president at Minnesota-based Associated Milk Producers Inc., said the company’s butter production is down between 5% and 10% this year compared with pre-pandemic years due to short staffing. Starting in 2021, AMPI has struggled to fully staff evening shifts at its butter plant in New Ulm, Minn., reducing the number of production lines it can run. As inflation climbs in the U.S., rising food and energy costs have pushed the nation’s most popular price index to its highest level in four decades. WSJ’s Gwynn Guilford explains how the consumer-price index works and what it can tell you about inflation. Illustration: Jacob Reynolds “It’s the second shift that typically runs over family time that’s become harder and harder to fill,” Mr. Reece said. Following declines in 2021, U.S. butter production fell 2% through July, according to USDA. Butter in cold storage facilities during the same period dropped 21% to 314 million pounds.have soared nearly 40% this year, reaching more than $3.20 per pound during trading this month, the highest on record. Shifts in global trade patterns have taxed butter supplies. Since 2016, the U.S. has imported more butter than it exported, from countries such as Ireland and New Zealand. That dynamic reversed in 2021, with U.S. exports this year through July surging 30% versus the same period last year as higher butter prices in foreign markets earlier this year made U.S.-produced butter more attractive, according to federal data and dairy economists. Dairy executives and economists say rising costs are pressuring manufacturers’ profit margins. Prices for cream, a key component of butter, have soared in recent months, with some butter makers opting to sell cream to manufacturers of goods, such as ice cream, rather than churn it into butter.The latest economic news, analysis and data curated weekdays by WSJ's Jeffrey Sparshott.Competition for cream has grown in recent years as U.S. consumers turn to higher-fat dairy products, eating more sour cream and drinking 2% or whole milk over skim, CoBank’s Mr. Emkhe said. Trevor Wuethrich, president of Wisconsin-based Grassland Dairy Products Inc., said his company is searching for cream to make more butter this fall as customers place larger-than-normal orders. At the same time, he said butter makers are trying not to overproduce. “What happens when orders stop? Now everyone is holding $3 butter and the market crashes,” Mr. Wuethrich said. AMPI’s Mr. Reece said he has warned retailers not to discount butter too aggressively during the holiday season, telling them: “Don’t go crazy. You can’t have a fire sale on butter, we won’t be able to supply you.” Kristi Peterka, a factory worker who recently began selling baked goods in Yankton, S.D., said she has been furiously stocking up on butter during store sales, adding to the roughly 40 pounds she has stacked in an extra refrigerator. Since she began selling homemade desserts a year and a half ago, local butter prices have surged 30% to $5.19 per pound, Ms. Peterka said. Recently, she said a nearby supermarket offered butter for one day for $1.68 per pound, with a limit of 2 pounds per purchase. During such sales, Ms. Peterka said she enlists help, sending her parents and in-laws shopping, too.Numbers current as of .
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