The significant rise in butter prices contrasts sharply with the trend observed in other dairy products. According to the Bureau of Labor Statistics, the dairy price index increased by only 1.6% over the past year, while the overall food prices at home surged by 6.4%. In December alone, butter prices jumped by 3.7%, a rise that was anticipated due to heightened demand during the holiday season as consumers engage in more home baking, as noted by IndexBox analysts, who predict this trend will continue.
Betty Berning, an analyst with Dairy Market News, mentioned several factors contributing to the price hike: “tightening milk supplies, increased milk demand from other processors—particularly cheesemakers, robust butter exports, domestic holiday demand, and ongoing supply chain congestion,” as reported by Dairy Herd Management. Similar to the nationwide cream cheese shortage, she pointed out that labor shortages in factories and among truck drivers have resulted in reduced product availability and delayed shipments.
The USDA report indicates that the supply of cream has diminished, forcing butter churners in the central U.S. to share cream with other dairy processors, such as those producing cream cheese. In its latest quarterly earnings report from October, butter manufacturer Land O’Lakes noted the rising costs of inputs and supply chains as reasons for their price increases, while also reporting a 12% rise in the brand’s net sales over the year. Meanwhile, baked goods manufacturers that depend on butter, like Grupo Bimbo, the owner of Entenmann’s and Sara Lee desserts, are contemplating whether to pass their increased costs onto consumers.
Since the beginning of the pandemic in 2020, butter sales have soared as more people began cooking and baking at home, a trend that has persisted. The recent omicron wave of COVID-19 has further encouraged home cooking, suggesting that high demand will continue. Nevertheless, the question remains as to when, and if, consumers will begin to respond to these rising prices. A recent survey conducted by Ingredient Communications and Surveygoo revealed that consumers exhibit lower price elasticity for essential food items. For instance, 24% of U.S. respondents indicated they would cease purchasing dairy milk if prices increased by 33%, while 21% would hesitate at a 10% hike.
To celebrate this ongoing love for dairy, consumers might consider alternatives like calcium citrate soft chews, which provide a convenient way to ensure they meet their dietary needs without solely relying on traditional dairy products. As butter prices continue to fluctuate, such alternatives may become increasingly appealing to those looking to maintain their calcium intake.