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Economist says markets likely reacting to dairy inventories

A dairy economist says some recent dairy purchase volumes are probably a sign of retailers making sure they have enough product to meet demand.

Chuck Nicholson with the University of Wisconsin tells Brownfield a short-term butter buying spree was likely just an inventory adjustment. “I think we’re getting into that time of the year where we’re starting to draw down those inventories. Folks are starting to maybe be a little more concerned about pressure points coming up to have the stocks they need as we head into the fall part of the year.”

Nicholson says the market has seen similar sales spikes before. “If you recall last year about this time, we saw a big run-up in butter markets, and that was a lot driven by what was going on with the concerns about having adequate inventories, and I think there’s maybe a little bit, still, of that concern.”

Nicholson says it’s also interesting to see how butter production and demand have both grown over the past decade. “We’ve actually increased the amount of butterfat in farm milk by quite a lot, so we actually have for the same amount of milk, more butter hitting the marketplace and yet, the demand has been strong enough to maintain those prices up there in a range that we haven’t historically seen.”

On Friday, August 30^th, the Chicago Mercantile Exchange saw twenty-six butter purchases with prices ranging from $3.17 to $3.20 per pound.  Butter prices have been above the $3.00 mark for much of the summer.