Why are US butter prices 'dropping like a rock' after record highs?

By John Geuss

- Last updated on GMT

Why are US butter prices 'dropping like a rock' after record highs?

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After reaching an all time high in September 2014 US butter prices are now "dropping like a rock," says's US dairy commodities expert, John Geuss.

Since mid-2013, US butter prices have skyrocketed, doubling from a low of $1.42 per pound (lb) to a September 2014 high of $2.85 per lb. 

At $2.85 per lb, butter was at an all time record high and well above the five year average of $1.45 per lb for the five years prior to 2014. 

The chart below shows the butter prices for Europe, Oceania, and the US for the last ten years. 

European butter prices are typically the highest. During 2014, the US butter price shot up well above the European price and continued to increase as the European and Oceania butter prices dropped. 

graph 1

The record high US butter price was certainly unsustainable and in October, the price began falling, dropping $0.77 per lb in two weeks.

What impact did the high US butter prices have? 

Exports dropped from 8,708 tonnes in August 2013 to 3,549 tonnes in August 2014. 

While domestic consumption data is not yet available, when the wholesale price of dairy products goes up, the retail price also goes up, and consumption does decrease. 

In this case, the drop could be long lasting, as there are many new butter-like spreads being promoted, and a high butter price will result in more trial of the competitive vegetable spreads which may remain the product of choice.

What caused the run-up in butter pricing in the US? 

In mid 2013, exports of butter doubled from “normal”​ levels. Inventories were depleted and continued to be very low. 

Surprisingly, butter churning did not increase to replenish the inventories. In fact, 2014 butter churning in the US is down 2.5% from the prior year. As a result of the tight inventories, butter prices rose and stayed high until demand dropped.

Inventory numbers for October are not yet available, but the price drop indicates that inventories are recovering.

The majority of US producers are paid on the component system and receive compensation only for pounds of milk protein, butterfat, and other solids. 

Butterfat prices are based on the wholesale butter prices and fall with the fall in butter prices. 

The butterfat payment for October, released November 5, was based on butter at $2.53 per lb.  

The weekly butter price is now well below $2.53 per lb so the monthly butter and butterfat prices will certainly fall again for the month of November.

john g 2
US dairy commodities expert, John Geuss.

John Geuss (left) is the editor of US dairy commodities blog, MilkPrice.

For John's detailed month-by-month examination of American dairy commodity movements, click here​  .

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Not in California

Posted by pat,

One would expect prices to fall as transportation costs decrease. But, here in northern California, butter is $4.99
Also, I read that butter was being rationed in Japan.

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Posted by Bunny Peplinski,

I would like to know where the prices are under $3.00 per lb....we have had pricing at $3.99 since last Sept!

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No substitute for real butter

Posted by Patti Cardoso,

John, thanks for your interesting article. I was wondering what was happening on the butter front.

Looks like I'll hold off on purchasing extra butter for Christmas cookie baking for a bit!

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