News Column

No margarine for error with butter prices at all-time high

August 31, 2014

By David Falchek, The Times-Tribune, Scranton, Pa.

Aug. 31--Butter prices have been sticking it to food budgets, recently reaching an all-time high.

High demand for cheese and an increase in U.S. diary exports tightened the demand for butter. The spot market price has nearly doubled over the past year, from $1.36 to $2.64 per pound. A quick survey of shelf prices showed prices around $3.50 per pound on the bottom end and upwards of $4 and $5 per pound.

With butter prices moving ever higher for at least a year, Joe Fasula, co-owner of Gerrity's Supermarket chain, decided to play the butter market, stockpiling it, confident the price would continue to climb. He was right, but his gamble did little to offset his melting margins.

"We have pallets of butter all over the place," he said. "You look at food prices and have to make a decision to buy more or buy less of an essential thing like butter. It's like playing the stock market."

The stock market is an apt comparison, said Cameron Thraen, Ph.D., Ohio State University dairy marketing and policy specialist who follows the milk market. Raw milk can be made into a wonderful range of products, but milk will always be made first into whatever product is most expensive.

"Milk follows money," he said.

When cheese demand peaked, topping $2.20 per pound, cheese makers bought it all. That left butter churners having to pay exorbitant amounts for their cut of the milk production and pass those costs on.

A record 17 percent of U.S. dairy production is exported to Mexico, Canada, Asia and elsewhere, Dr. Thraen said, or 2.5 months of production.

Fortunately for many consumers, there are butter substitutes. So the most affected households will be those who need real butter on that Sunday bagel or who want the richness in baked goods that only butter can provide.

Once warehouses and stores are stocked for the holidays, around November and December, butter prices should start sliding.

In a world of big box stores and mass-produced food, the only way a small bakery can survive is by making a top shelf product that stands apart, said Bob Zakreski, Minooka Pastry Shop co-owner. The shop shuns cheaper butter alternatives like shortening and margarine used in big box bakeries and sticks to real butter -- no matter the price.

Minooka Pastry buys butter in 65-pound blocks and uses it in the shop's signature cookies and items such as lemon-pie filling. Since the beginning of the year, the price he pays for a pound of butter has gone from $1.90 to $2.90 per pound.

While paying more for ingredients is never fun, he said the hit from butter prices have been offset by decreases in costs of flour and sugar, which have a greater impact of the unit cost of most items the Minooka pastry produces.

That's good, because changing menus and prices is cumbersome and something the shop tries to limit to once a year. "Ingredient prices are changing all the time," he said. "At the end of the year, you hope the ups and downs have balanced out."

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Source: Times-Tribune (Scranton, PA)

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