Monday, September 15, 2014

Literally and figuratively the butter spread is getting wider. See how that affects trade flows.

The price of butter has surged in recent days as well as recent months. Here is a graph I created showing the price of butter in the US and in world markets.  The prices are per pound based on a  metric ton (2204.62 lbs) so this is the price at production for wholesale sale, NOT RETAIL (the price you see at the store).

The world prices since 2/19/2013 are in RED and the US price is in BLUE.

Notice, of the most part, world prices are consisently above the US price but a crossover occurs between March 19th and April 19 of 2014.  Then there is a significant diverence where the US price quickly outpaces the world price.

As of today (9/15/2015) the US price is at $3.00 lbs and the world price is about $1.25 (Source) so on the graph the RED world price line end point is the same but the US red line extends up to the $3.00 mark.  The spread is even wider than what appears on the graph!

Source: Haywardeconblog. Using historical data from HERE and HERE
This gives me an opportunity to do a lesson on international trade to show what happens in markets when the world price of a good is differnt from the domestic price and how trade flows might be affected.










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