ARLINGTON, VA - Consumers getting ready to do their holiday baking should see the lowest seasonal butter prices since 1996, according to the American Butter Institute.

The wholesale price of butter, which as recently as last year reached a record $2.81/pound at the Chicago Mercantile Exchange, has dropped below $1/ pound for the third time this year - a price level which butter didn't drop down to at all during most of 1997 and all of 1998. In fact, on October 20th, butter sold for just $0.97½/pound at the CME. This time last year, butter's wholesale price was $2.33/pound. Butter prices haven't been this low seasonally since November 1996, when they traded at around $0.74/pound.

Jerry Kozak, Executive Director of ABI, said that "Unlike last year when bad weather cut supplies short, milk production on the farm has been much stronger in 1999. Greater production ultimately means lower wholesale prices for most dairy-related items like butter and cream. So the good news for consumers is that they should see significantly lower prices this fall for butter, assuming retailers pass those cost savings along to shoppers."

Butter prices have been increasingly volatile since the early 1990s, largely due to the diminished presence of the U.S. government's price support program, which helped to stabilize butter prices at the wholesale and retail levels. In 1998, the wholesale price, which is established at the Chicago Mercantile Exchange, ranged from a low of $1.13/pound in January, to a high of $2.81/pound in September - still the all-time record wholesale price for butter.

In 1999, however, the wholesale butter price peaked at the $1.51/pound level during a three-week period in May and June, and now hovers around the $1/pound mark. The annual average wholesale price for 1999 (through Oct. 20) is $1.30/pound. That average compares to an annual average price of $1.77/pound in 1998. Retail butter prices are higher than wholesale prices, and typically follow the up-and-down movement of wholesale prices.

Many of the factors leading to recent price volatility have faded, according to ABI. Last year, extreme wet weather in California, the nation's number one butter producing state, caused serious problems with the supply of milk and cream that are used to produce butter. That weather problem affected supply, while at the same time, strong demand for products that use cream, such as cheese, ice cream, and other dairy-rich foods, created a supply-demand imbalance that drove prices to unprecedented levels.

"This year, the supply-demand situation is much more closely in balance. Nationally, milk production is up more than 3% through September, meaning that cream supplies are more plentiful than last year. Consumers this year should be benefiting from more stable retail pricing, although not all of the price reduction at the wholesale level has shown up on the supermarket shelf, " Kozak said.

The American Butter Institute, headquartered in Arlington, VA, represents the marketing, policy, and regulatory interests of the nation's butter manufacturers. ABI's 35 member companies market approximately 90% of all the butter manufactured in the U.S.