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Holiday Baking Could Get Pricier as Butter Climbs to Record

·1 min read

(Bloomberg) -- Butter prices have soared to a record -- further adding to escalating food costs as grocery chains start ramping up orders ahead of the holiday baking season.

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Spot butter rose to a record $3.17 per pound Friday. The culprit, according to one dairy market expert, is high temperatures in California, the leading US dairy state. Hot weather makes it difficult for cows to produce milk, and lingering drought has also reduced the availability of animal feed, according to Nate Donnay, director of dairy market insight at StoneX Group Inc.

“I think what really put us over the top was the heat in the west,” he said.

Butter’s US surge comes as retailers begin to buy ahead of holidays in November and December to capture consumer demand for baking. Rising spot prices can signal higher retail prices ahead, even though butter in stores is already at a record high, according to Donnay. High US dairy exports have also contributed to tight supply, he said.

The US dairy woes echo those in Europe, where drought has withered farms and threatened to push up prices for milk and cheese even higher. Production issues in California, which produces more than 18% of US milk supply, adds pressure to already tight US dairy supplies as costs to feed cows soar. Animal feed is made from grains like corn, which have seen rising prices as Russia’s war in Ukraine -- one of the world’s biggest breadbaskets -- constricts global supply.

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