US deregulation forces up butter prices

14 July 1998

US deregulation forces up butter prices

DEREGULATION of the US dairy sector is being blamed for the price of butter soaring to record highs, reports the Financial Times.

The cash price at the Chicago Mercantile Exchange was about $1.12 cents a pound at the beginning of the year but by the end of last week it was $1.98 cents — almost double that of a year ago.

Analysts have scaled back profit estimates for several dairy products companies.

The 1996 Freedom to Farm Act requires all dairy price supports to be phased out by 2000. This means the buffer that used to exist which could be released onto the market in times of shortage no longer exist.

The Dairy Farmers of America co-operative said the industry was experiencing more price volatility than it was used to.

But the Financial Times comments that the underlying trends would be favourable if deregulation now allowed the forces of supply and demand to be translated into market price movements.