US facing butter shortage ahead of holidays

America is facing a butter shortage right before the holiday season.   

According to data from the United States Department of Agriculture (USDA), the amount of butter sitting in U.S. storage facilities in August fell 10% month-over-month. However, it was down 22% compared to the same time a year ago.

For example, there was over 282 million pounds of butter in warehouses last month, down from over 362 million pounds in August 2021, according to data compiled by the USDA.

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The Agriculture Marketing Service's recent Dairy Market News report shows supplies are tight around the nation. In the report, officials say demand is outpacing supplies in the West, where producers are running reduced production schedules. 

Meanwhile, butter makers in the Midwest say "spot loads of cream are very tight to unavailable" and "in the Northeast, retail butter demand is picking up, but tight inventories are causing some producers to regulate supplies across existing orders," according to the report. 

As supplies dwindle, the price for butter has surged, outpacing all other food on the Consumer Price Index. 

Costs for groceries in August rose 13.5%, however, butter prices rose 24.6%, according to the Bureau of Labor Statistics. 

Tanner Ehmke, lead economist for dairy and specialty crops at CoBank, projected earlier this summer that "historically high butter prices are all but certain to continue for the remainder of 2022" as shortages continue. 

In a recent June report, Ehmke said supply problem are the result of U.S. dairy farmers and butter processors struggling to increase production due to rising costs of feed, energy, heifers and even labor.

"Some churns are slowing production due to tight U.S. milk supplies and short staffing at plants," Ehmke said. 

According to the data from the USDA, monthly milk production has dropped in several of the past few months, including as recently as June. From January through June, U.S. milk production was down by almost 1% for the year, according to the USDA. 

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Labor shortages have only "aggravated existing supply issues," Ehmke added.

However, with tight milk and cream supplies, Ehmke previously warned that cheese makers may start to face production issues as a result. 

"Competition for scarce milk will put cheese makers at a disadvantage to butter manufacturers that are better positioned to pay higher prices for milk," Ehmke said. 

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With higher prices,"cheese processor margins will be squeezed, resulting in slower cheese production," he added. "At current price levels, cheese makers will not want to build excess inventories for the months ahead," although it will make more milk available for butter churns.