High Butter Prices, Melting

If you’ve been to the grocery store recently, you’ve probably noticed that butter and dairy prices had been trending higher until recently. The big drop in butter prices in March is an interesting part of the story of the changing cost of living.

The American Institute for Economic Research on Friday released its Everyday Price Index, which is an index of basic goods and services that consumers buy on a regular basis. With gasoline prices increasing for the second consecutive month – up 10.5 percent in March – the EPI was up 0.8 percent in March, compared to the CPI, which recorded a gain of 0.2 percent.

Prices of all grocery store food decreased 0.5 percent in March, and restaurant food was up 0.1 percent. One of the biggest changes in price from February to March was butter, which fell 4.7 percent.

Dairy production in the U.S. was up 5.9 percent year-over-year in the fourth quarter of 2014 and up 2.3 percent year-over-year in the first quarter of this year, according to the Federal Reserve Board/Haver Analytics. Meanwhile foreign demand for U.S. dairy products has fallen with exports of dairy products decreasing 19 percent year-over-year in the fourth quarter of last year, according to the Census Bureau/Haver. “Dairy production in the U.S. is still growing, albeit at a slower rate, while foreign demand is dropping. The result has been falling dairy prices.” said Theodore Cangero, AIER’s Data Scientist.