Butterfat might be path
to Fat City

Thursday, November 12, 1998

Now that stocks have become so treacherous and there are rumors the Beanie Baby market may tank, I need a new investment strategy.

I think I smell a winner, and the aroma is wafting out of the kitchen. Thanksgiving pies, Christmas cookies and cheese logs could pave the way to financial independence and a nice retirement home, one where they let you put your feet on the furniture and don't make you sign up for ballroom dancing or macrame class.

I'm bullish on butterfat.

Newsweek reports that Americans eat an average of 5 pounds of butter a year, 2 pounds of that after Nov. 1. "Butterfat is like gold," reports Gene Grabowski, a spokesman for the Grocery Manufacturers of America. "At least through Thanksgiving, prices are going nowhere but higher."

Gluttons R Us

Milk butterfat is the key ingredient in sour cream, whipped cream, ice cream, pastry and, of course, butter. In short, butterfat is responsible for all the things that make life worth living. But before I put my future in the hooves of a dairy cow, I thought I should find out why the butterfat market is so, shall we say, soft.

"There's a whole lot of demand and not enough supply," says Joe Cornely, a spokesman from the Ohio Farm Bureau.

Geez, are the cows on strike or something?

He reassured me that the cows are doing their best, that this is not their fault. You will not be amazed to know whose fault it is. El Nino. And Baby Boomers.

Thanks to El Nino, we had a hot summer, so the cows drank more water and ate less food. This resulted in lower production of butterfat. And because we had a hot summer, people ate more ice cream. And to top it all off, Baby Boomers are flirting with fat again.

"I think it's a backlash," Mr. Cornely says. "People are getting tired of hearing that everything kills you. They don't want to live on bean sprouts and bottled water."

A Wisconsin Farm Bureau study says people are drinking skim milk but eating high-fat ice cream. Doesn't that sound just like us? Right now, somebody is probably plopping a dip of Graeter's in her Slim Fast. Somebody else is washing down his Doritos with a lite beer.

Cows out of the loop

Cows, being sensible creatures, could not have foreseen this turn of human events. They thought they were supposed to be producing skinnier milk. And they have been. For the past 10 or 15 years, Ohio's dairy herds, mostly Holsteins, have been producing less milk fat, according to Mr. Cornely.

"You can't just throw a switch and reverse this," he says. And while we're passing around the blame for the high price of butterfat, we might just throw a little toward Wisconsin. The Chicago Mercantile Exchange reports stiff competition for the available butterfat from cheese manufacturers.

And so Wisconsin, with its annoying cheesier-than-thou attitude, must assume some responsibility. Its legislature not only voted to make cheese the official state food, but people there voluntarily wear it on their heads.

Not everybody thinks that getting a lock on butterfat is a foolproof way to long-term financial independence.

Richard Graeter, executive vice president of Cincinnati's most celebrated ice cream company, says, "We considered raising the price of our ice cream, but we think the price of butterfat will go back down again." A $3.50 pint of Graeter's vanilla costs the company 25 cents more to produce now than it did six months ago.

Mr. Cornely looks for a market correction next spring. "The herds will be feasting on that new grass, and production will jump like crazy. The price will go back down."

This sounds very complicated to me, even worse than hedge funds. Maybe I'll just buy a cow.

Laura Pulfer's column appears Sundays, Tuesdays and Thursdays. E-mail her at laurapulfer@enquirer.com, call 768-8393, or fax at 768-8340. She can be heard Mondays on WVXU radio and on NPR's Morning Edition. Her new book, I Beg to Differ, is available at (800) 852-9332.