United States | Butter prices soar

This week it surpassed 2022 records

It has nothing to do with Fourth of July festivities, but butter prices are skyrocketing in the United States these days. But that increase isn’t likely to be reflected in supermarkets north of the border. Here’s a look at butter, in five questions.

How can this increase be explained?

With reserves being particularly low, the industry, which is (already) seeing the holidays approach, wants to stockpile the butter needed to make the logs and savoury pies that sell a lot in the run-up to Christmas. Seasonality plays a role in this increase in another way, notes Bruno Larue, from the Department of Agri-Food Economics and Consumer Sciences at Université Laval: ice cream production has required a lot of cream in recent weeks. More cream, therefore less dairy fat available to make butter.

“The price of butter has been rising continuously for three or four years, not just in the last few weeks,” notes Mr. Larue. Notably because American manufacturers have preferred to make less, so as not to have to support stocks in the current economic context.

Why does the price remain stable here?

Since butter is a dairy product, it is subject to supply management in Canada, which is not the case in the United States, where the price received by producers fluctuates more.

In Canada, the Canadian Dairy Commission sets the price once a year, based on a mathematical calculation based on farm production costs and the consumer price index.

This freezes the price paid by processors who make butter, but not the price paid by consumers who buy it at the grocery store, specifies Charles Langlois, president and CEO of the Conseil des industriels laitiers du Québec.

“Retailers don’t tend to vary the price of butter much, however,” he says, “except during promotional campaigns.”

And sometimes these offers are particularly tempting, the aim being to attract customers to the store, with an unbeatable price on this basic ingredient.

“Butter can certainly play the role of a loss leader,” says Charles Langlois, specifying that we sometimes see prices hovering around $4 per pound, which is significantly below the usual cost of butter.

Can Quebec industrialists take advantage of the situation?

Yes a bit.

The first principle of supply management is to satisfy the local market, to ensure a balance between demand and supply by protecting the market. “It also means ensuring a stable income for producers,” adds Charles Langlois.

But nothing prevents a local industrialist from selling his products at a good price to neighbors hungry for butter.

The reverse is also true: Canada imports some butter and other dairy products such as cheese, free of tariffs, as permitted under its trade agreements with the European Union or under the Canada-United States-Mexico Agreement or the Trans-Pacific Partnership Agreement.

Which explains the presence of French butter in certain grocery stores – and in the croissants of bakers who prefer it to local butter.

These price fluctuations and this increase on the American market could possibly have an effect here. “It could create business opportunities for people who use butter to make their products,” says Charles Langlois. According to him, a company that works with American butter for its pastries could be tempted to change suppliers if the American price becomes too high. Especially since, according to a report from the United States Department of Agriculture, the price of butter should continue to rise in our neighbors to the South.

If there is an increase in demand for Canadian butter, could prices on the local market increase?

Butter prices are rising all the time, everywhere – the increase is also observed in Europe. The situation in the United States could have a small influence on the local market, but the American market for butter and cheese is relatively closed, explains Andrew Novakovic, from the Center for Dairy Excellence at Cornell University. And this is for a reason that is more taste-related than economic: “the type of cheese and butter that we produce does not particularly correspond to global demand or to what other major suppliers produce,” explains the professor, who nevertheless specifies that there are certain exceptions. And that Canadian dairy production is – in general – in the same situation.

This is partly why butter prices in the United States are dictated by local supply and demand.

When did we start eating butter again?

The butter consumption cycle is particularly revealing of food trends: while it had been blacklisted in the 1970s and 1980s, when people turned to margarine, butter regained an image of a more natural fat at the turn of the 2000s. Influenced by effective advertising campaigns, our butter consumption has gradually increased over the past 10 years.