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Butter futures reached an all-time high in Chicago as Americans’ rising appetite for the fatty dairy spread and rising exports erode U.S. inventories.

Domestic consumption is projected to rise 0.8 percent to 788,000 metric tons in 2014, according to the U.S. Department of Agriculture. That would be the second-highest ever in data going back to 1965. Shipments in the first six months of the year were up 42 percent from 2013. Demand is rising as milk production trailed analyst expectations, while fat content, used to make butter, is also dropping, according to Eric Meyer, the president of Chicago-based HighGround Dairy.

Consumers have increased purchases for five straight years, while margarine sales dropped, according to researcher Nielsen NV. The gains left U.S. stockpiles in July 42 percent lower than a year earlier, USDA data show. Tight butter supplies are contributing to higher costs for buyers including Panera Bread Co.

“Ultimately, there’s good demand for cream-based products that’s tightening up the market,” Dave Kurzawski, a Chicago-based senior broker at INTL FCStone Inc., said in a telephone interview. “We haven’t had a tremendous amount of milk to deal with either, and the quality of fat in milk has gone down.”

Butter futures for October settlement climbed 1.1 percent to $2.55 a pound at 11:12 a.m. on the Chicago Mercantile Exchange, after touching $2.5500002, the highest ever for a most active contract. The commodity is up 62 percent this year.

U.S. prices are higher than those from other producing nations, signaling American shipments will slow. Butter is averaging $2,985 a metric ton ($1.35 a pound ) in New Zealand, the world’s biggest exporter, the USDA said yesterday.

“We have a gaping hole with where U.S. prices and where world prices for fat are,” Kurzawski said. “That’s going to have to close at some point.”