Do higher butter prices equal higher profits?
Supply and demand is the key issue in increased prices. Higher prices don’t equate with higher profits for butter manufacturers. Butter prices are determined by several factors including the cost of ingredients and supply and demand. For example, seasonal hot weather throughout the country has caused an increase in demand for butterfat for use in ice cream and related products. At the same time, there has been a seasonal decrease in milk production resulting in tight supply conditions and a marked reduction in total butter production. These factors, along with an increase in worldwide demand, have caused prices to increase. The wholesale price of butter is set based on weekly trading at the Chicago Mercantile Exchange, along with other commodities. These prices are reflected in the retail price. Each store sets their own price. Challenge Dairy is hopeful that conditions will change and that prices will decline in the near future.
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