Remember when a stick of butter was about 50 cents? That was less than a year ago and now it costs more than a dollar. Are the cows on strike? What is going on?

“We got killed on butter prices when they rose this summer,” laments Bob Burns, co-owner of the Hollyhock bakery on Capitol Hill. Bakeries, especially high-end ones like Hollyhock, use huge quantities of butter. Burns put off raising prices to reflect the additional costs until September, and the result was a net loss for the summer of more than $5,000. The bakery ultimately raised prices of certain high-butter pastries (a croissant went from $1.50 to $1.85). That action, combined with a recent slight decrease in butter prices, is helping to put the bakery back in the black. “We couldn’t bear to use shortening substitutes, which was the alternative,” says Burns.

According to Jerry Kozak, CEO of the National Milk Producers Federation (NMPF), based in Arlington, Virginia, the butter trouble is one of supply and demand. “Since 1990,” Kozak explains, “ice cream demand has risen by 10 percent, but butterfat production has only risen by 6 percent.” A growing national taste for domestic cheese similarly cuts in on butterfat supplies. Americans ate a record-breaking 28 pounds of cheese per capita in 1997.

And, of course, no explanatory exercise is complete these days without some reference to El Ni�California is the biggest dairy-producing state, and the heavy rains of El Ni�combined with very high summer temperatures, stressed the cow population, which in turn produced less milk. “Cows don’t like standing knee-deep in water,” observes Chris Galen, spokesperson for the NMPF. Udder infections, heat prostration, and morbidity contributed to reduced milk output.

Government policy has also had its effect on butter prices. In the 1980s the US government purchased and stored surplus butter when prices were low, then sold the surplus when prices were higher in order to stabilize the price. Government, Kozak said, “has basically gotten out of the butter business, so there’s likely to be more price volatility in the future.”

Darigold, a dairy-farm cooperative, is not complaining about the high prices. Darigold’s vice president of public affairs, Doug Marshall, notes that “periods of high demand allow small, at-risk farms to survive longer than they might otherwise be able to.” Washington is the eighth-largest dairy-producing state in the country, but loses about 10 percent of its small farms each year, according to Marshall.

Butter consumption normally skyrockets during the holidays; will the new butter economy kill, or at least radically alter the flavor of, Christmas? The news, for the moment, looks good. Butter prices topped out this past September at about $2.81 per pound wholesale. As of early November they’re down to $2.25, and many industry magazines predict that they’ll be back down to the $1.60$1.80 range by early 1999. That’s just in time for New Year’s resolutions.