DAIRY INDUSTRY REPORT (CONT.) Butter


The fundamentals finally caught up to the CME butter market over the last 1-2 months. When cheese and milk powder prices were rallying, butter couldn’t break through the $3.20 level. A bearish August 31 stocks number eased the market’s fear of not having enough butter in Q4, and when rumors circulated of one or more traders caught holding large amounts of inventory, butter prices fell sharply. With prices back where they started the year, there could be more downside to prices once holiday demand is completed. Production was strong once again with September butter output up 11.3% vs. last year. In addition, October 31 stocks were 11% above prior year, and with ample cream supplies in Q4, the gap is expected to widen.


Is $2.25 butter possible once again? At this point, that looks like a low probability, but the market is trying to find a new equilibrium now that the fear of a Q4 shortage has abated. The bearishness in 2024 prices has carried over into 2025 with a reduction in the forecast to a $2.77 average (CME) for the year. Like cheese, there is a higher probability of lower prices vs. higher prices given the current market outlook.


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WHAT’S IN STORE | 2025 © 2025 International Dairy Deli Bakery Association Dairy Industry Report 62


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