Spot cash butter tumbled 18 percent to $2.30 a pound Thursday on the Chicago Mercantile Exchange. That marked the biggest drop in exactly 11 years. On Dec. 10, 2004, the price plummeted 20 percent.
The price has slumped 27 percent from a record $3.135 on Sept. 25. Production in October rose 9.4 percent from a month earlier after the market rally, U.S. Department of Agriculture data showed on Dec. 3. Supplies in cold storage rose 21 percent to 179 million pounds at the end of October from a year earlier, the agency reported on Nov. 23.
“Butter supplies were never in dire shape, and manufacturers decided they would start offering more to the market today” with holiday demand winding down, Curtis Bosma, an account manager for HighGround Dairy in Chicago, said in a telephone interview. “No one wanted to build any new inventories at the high prices.”
Butter futures for December settlement fell 1.1 percent to close at $2.67 a pound on the CME. The most-active contract has jumped 66 percent this year, and the spot price has surged 48 percent.
Futures for February settlement fell 1.8 percent to $1.915 a pound, the lowest for the contract since Oct. 27 and a signal for more losses on spot butter, Bosma said.
Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, said Thursday it will reduce sales of whole milk powder in the next 12 months after rising global production drove dairy auction prices in August to a 12-year low.
Source: Bloomberg
