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Internet Article

Steve Ginsberg stated, "The butter market has lost its fat" (1998). The lean supplies will be driving up the price of butterfat and these higher costs are going to affect a wide variety of products. This is a result of the market equilibrium not equal in the supply and demand, which causes a price increase or decrease.


Demand is the quantity that consumers are willing to pay and demand depends on factors, such as, consumer's likes and dislikes, prices, and substitutes. People have needs, desires, and wants, which has consumed the nation's supply of butterfat. Butterfat is the main ingredient found in ice cream, cheese, and many other popular products. This makes the demand exceed the supply, which has caused prices to increase on the products that use butterfat.

Further, adding to this problem are the manufacturers in industries, such as, yogurt and chocolate that are now battling to get their hands on the butterfat. Through this process of the battling between these industries to find and buy the butterfat, has caused an increase in the consumer prices.

There are several factors causing this consumption, which range from the increased demands to the lower government stockpiles. Chris Galen, spokesperson for the National Milk Products Federation said, "We're going to see higher prices throughout the summer because prices are rising as the supply slacks" (1998). Passing along these higher prices to consumers to offset the higher costs, forcing the companies selling products made with butterfat to raise prices between 7 and 10 percent. Further, on the Chicago Mercantile Exchange the price of grade AA butter has risen to $1.95 per pound, which is a 73 percent increase over last year's prices.

Diane McIntyre, public relations manager for Oakland, California-based Dreyer's Grand Ice Cream Inc stated, "We've chosen to raise our prices in some markets, including Baltimore and Washington" (1998). Dreyer's has had to raise the price on their half-gallon containers of ice cream by 30 cents and they do not foresee any price decrease until next year. In addition, Dreyer has no choice but to warn Wall Street that their second-quarter earnings are not going to meet expectations because of how this has affected them.

In the early 1990s, the federal government purchased surpluses of milk, cheese and other dairy products from farmers to support prices. When prices went up sharply, as they have now, the government would



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