Three things are driving the rally, according to Brendan Curran, a risk-management consultant at INTL FCStone Inc. in Chicago. First, milk production is shrinking in drought-stricken California, the biggest U.S. butter supplier, driving up costs for producers. Second, demand is strengthening as we come up to the holiday baking season.
And third, after years of shunning butter in favor of low-fat spreads, even health-conscious Americans are now embracing the consumption of natural fat as a shift in medical opinion casts doubt on the link to obesity and heart disease. Fat is “not a villain any more,” Curran said in an interview. Global fat demand per-capita will jump almost a quarter, according to a report last week from the Credit Suisse Research Institute.
Prices jumped to a record a year ago, a rally that was export-driven, Curran said. This time, consumers who don’t have enough inventory «took a look at what happened in 2014 and didn’t want to experience that ever again,» he said.
Government data released Tuesday showed U.S. butter stocks in August were down 18 percent month on month. A separate report shows total production was 133 million pounds in July, 3.2 percent less than a year earlier.
Source: Bloomberg
