Butter Surges to 16-Year High as U.S. Exports Cut Reserve
By Lydia Mulvany Jul 24, 2014 1:28 PM ET
The 1,000 pounds (454 kilograms) of butter that Gerhard Michler uses every week to make cookies, cakes and petit fours at his San Francisco bakery is leaving the pastry chef with a case of ingredient indigestion.
While all his costs are up, including chocolate, none rose more than the butter used in everything Michler bakes at Creative International Pastries. Prices on the Chicago Mercantile Exchange jumped 81 percent in a year to $2.62 a pound, the highest since 1998, as surging U.S. exports eroded inventories and dairies failed to keep up with increased demand.
“There’s a shortage of butter,” Jon Spainhour, a broker and partner at Chicago-based Rice Dairy LLC, said in a telephone interview July 3. “This spring, instead of building inventories, we just shipped it out of the country. We’ve hauled a lot of product out of the market.”
Even as rising global milk output signals a slowdown in U.S. exports, tight domestic butter supplies are contributing to higher costs that buyers including Panera Bread Co. expect will last through 2014. Retail-food prices are rising at the fastest pace in three years, fueled by meat, dairy, eggs, fresh fruit and vegetables, government data show.
The spot price of butter has surged 71 percent this year, after yesterday reaching the highest close since September 1998, and butter futures on the CME jumped 58 percent, touching a record $2.50 today before dropping. The Bloomberg Commodity Index of 22 raw materials gained 2.7 percent this year, while the MSCI All-Country World Index of equities rose 6 percent. The Bloomberg Treasury Bond Index gained 3.6 percent.
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http://www.bloomberg.com/news/2014-07-23/butter-surges-to-16-year-high-as-u-s-exports-cut-reserve.html
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