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Butter business booming thanks to global warming

It's one thing that isn't melting because of global warming: the international butter market.

This year's record high temperatures, especially in Eastern Europe and Russia, has led to cool profit margins for butter exporters in the United States, said dairy policy expert Mark Stephenson, presenting a paper Dec. 14 at Cornell's annual Agribusiness Economic Outlook Conference.

"Excessive heat in those areas caused widespread drought and crop failure, and milk production in those regions suffered as well," he said. "Russia imported a significant amount of butter -- much of it from the U.S. -- to make up for a shortfall in their production."

That, combined with an overall short supply -- commercial stocks of butter have reached some of the lowest levels since 2001 -- led to dramatic increases in butter prices, he said.

The year also saw the largest growth in cheese production since 2006, Stephenson said, thanks to a drop in export demand elsewhere.

"As we headed into 2010, milk production levels were strong, but domestic and export demand was weak. Much of the extra milk production found its way into a cheese vat," he said.

Stephenson, who recently left Cornell to become director of dairy policy analysis at the University of Wisconsin-Madison, delivered an overview of the U.S. and New York dairy markets to the gathering of about 150 farmers, business leaders and academics.

He warned that the same crop failures that had a positive impact on butter sales could have devastating consequences for U.S. dairy farmers in other ways. The loss of Russian grains into global markets and increased demand for ethanol as a biofuel have led to high corn prices -- bad news for farmers who buy most of their feed, Stephenson said.

Dairy producers should continue to monitor international economies and set their sights across the seas when scouting out opportunities, he added.

In 2008 exports surged to 10-12 percent of U.S. milk production, and their value exceeded those of imports for the first time. This dropped in 2009 with the global recession but has picked up again already as the economies of other countries have rebounded more quickly than ours.

"Exports are our portal for significant growth in sales," Stephenson said. "The U.S. dollar has weakened against most major currencies. Although this sounds like a problem, for U.S. exporters it is a boon, making our goods look relatively less expensive."

Stacey Shackford is a staff writer at the College of Agriculture and Life Sciences.

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