What crop price volatility? Many farm commodities are seeing huge price swings, with the International Cotton Advisory Committee, for instance, saying volatility in the fibre's price had reached "extremely high" levels seen only once before, 24 years ago. However, Chicago butter futures have been becalmed for nearly a month, if at a historically high level of $2.10 per pound. "Butter prices are stuck," the Milk Producers Council, a joint Canada-US group, said. "It's now been 20 trading days without a change," despite the offer by two sellers of a total of five carloads last week in what had appeared a potentially market-moving moment. "The offers were accepted, and that was that," the council said. Butter vs cheese The stability in butter comes despite data showing a jump in US production of 25m pounds of butter in December, higher than a 13m-pound rise in sales, including exports. "Still, the amount in storage at the end of December was 49m pounds lower than the previous December," the council said, flagging something of a "global shortage" in butterfat as a result of a preference in producing countries to process milk into other dairy products. "Major exporters in Oceania and Europe are simply shifting production to cheese, in Europe, and to whole milk powder, New Zealand, in response to the demand they have for those higher valued products." Supply squeeze Indeed, prices of whole milk powder jumped an average of 7.2% in the latest twice-monthly internet auction run by Fonterra, the world's biggest dairy exporter, to $3,995 a tonne, their highest since July 2008. Anhydrous milk fat, a dairy product used by bakers and ice cream makers, hit a record $6,486 a tonne. The price gains are being attributed to rising demand for dairy products at a time when poor weather in New Zealand, and hangovers from weak markets in Europe and the US, are expected to limit growth in output in the major exporting countries this year to about 2%. "Based upon what's happening to prices for internationally traded dairy products, a 2% increase in total milk production may not be enough to satisfy total global demand for those products," the council said.
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