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Nothing smooth about butter

Butter prices hit new highs ahead of baking season amid shortages of milk and labor

High butter prices expected to persist

Butter is currently second only to eggs for the title of most inflationary food item, up 25% year over year, compared to 13%-14% for the entire grocery category. Inventories of cold butter at the end of July were the lowest since 2017. Those stocks are usually built up early in the year and drawn down most heavily during the winter baking season. In anticipation of rising demand as consumers bake their Thanksgiving desserts, butter manufacturers are warning retailers to not discount their current inventory as they may not be able to fully meet upcoming demand. 

Butter futures hit an all-time high earlier this month. Source: Barchart.com Inc.

Factors keeping butter prices high include a smaller cow population (at its lowest level since 2016) and the associated lower level of milk production as well as a scarcity of labor, particularly for second shifts, which include less desirable evening hours. When milk supplies run low, butter producers are most at risk because milk first goes to bottlers, then ice cream or cheese manufacturers, with butter manufacturers getting what’s left over. As a result, butter supplies and prices can be more volatile than those other categories that use milk as a main ingredient. 

A new definition of ‘healthy’

The Food and Drug Administration is proposing to update the definition of “healthy” foods in order to be consistent with current nutrition science and federal dietary guidelines. If the action is finalized, it will revise the requirements for when the term “healthy” can be used directly or as an implied claim in food products labeling. 

The proposed guidelines vary by product category and include limits for added sugars, sodium and saturated fats while still claiming to be “healthy.” In addition the food product in question needs to have the equivalent of a serving of fruits, vegetables, grains, dairy or protein. 


The next step is there will be a 90-day comment period and the potential for the definition to be adjusted further remains. I believe this could have major implications for consumer packaged goods companies and their supply chains. As CPG companies look to meet an updated criteria for a food that is “healthy,” I expect many companies to adjust their ingredients and formulas so they are just over the threshold. It’s clear to me that many CPG products are marketed as healthy but really are not due to their high sugar content, such as certain cereals and fruit juices.  

Food Dive provides historical context to this issue and explains that “healthy” was first given a regulated definition in 1994 that focused heavily on fat content. That old definition is misleading because it over-penalizes naturally occurring fats, such as those from nuts, fish and avocados while under-penalizing other food products that may be low in fat but have high sugar or sodium content.  

The governmental push for a new definition of “healthy” comes at the same time as the U.K. is working to place greater restrictions on foods it deems as unhealthy because it is high in fat, sugar or salt (HFSS). While the U.K. regulations may also change regulations, its proposals go beyond only labeling requirements and restrict the ability of companies to advertise unhealthy foods during hours when children are likely to be watching and restricting the sale at certain locations, such as checkout counters. 

FreightWaves.com contains lots of coverage of Hurricane Ian including:

Machinist union reaches new tentative agreement with the freight railroads

While each of the rail unions currently bargaining with the railroads has reached tentative agreements with the carriers, the possibility of a rail strike remains top of mind for many shippers because the ratification of those agreements is not a certainty. The latest development is the International Association of Machinists and Aerospace Workers (IAM, which performs machinist and maintenance work on locomotives), a union that represents about 5,000 workers, reached a new agreement with the freight railroads. That’s important because the IAM voted to reject a tentative agreement earlier this month and was the only union that voted to reject ratification of the three that had voted so far. See additional detail in Joanna Marsh’s article here

Domestic intermodal volume took a seasonally usual dip in mid-September ahead of a possible strike. All unions have reached tentative agreements with ratification votes to take place in the coming weeks. Source: FreightWaves SONAR

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Michael Baudendistel

Mike Baudendistel is an analyst and Market Expert at FreightWaves focusing on the railroad, intermodal and transportation equipment industries. Prior to joining FreightWaves, Baudendistel served as a senior sell-side equity research analyst covering the publicly traded railroads, suppliers that manufacture and lease railroad equipment, and suppliers that manufacture trucks, trailers, engines and other components. He has 14 years of experience following the freight transportation industry with experience that also touched the truckload, Jones Act barge and domestic logistics industries. He is a CFA Charterholder.
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