Butter Prices Moo-ve Higher

It's the peak time of the year for home baking, and the high price of butter is catching many cooks by surprise.

Butter prices are up a whopping $1.20 a pound compared to last year, reports CBS News Correspondent Jim Stewart. The reasons for the increase are the El Nino rains and a summer drought, which led to cows producing less milk. At the same time, much of the reduced milk supply wasn't being used to produce butter.

"What we're seeing is classic supply and demand in the marketplace," says Susan Ruland of the Dairy Foods Association. "Production of milk has been down on the farm, but the demand for dairy products has been very strong. People are eating a lot of cheese."

On average, Stewart reports, Americans consume about 28 pounds of cheese per person every year. The main culprit is pizza. Takeout pizza accounted for 7.6 billion pounds of cheese consumed by Americans last year. Since farmers could make more money converting milk into cheese, butter production went down.

The United States also exports 40 million pounds of subsidized butter to Russia and other overseas markets.

Thus, when the holidays arrived, butter was in short supply. While many cooks look for low-fat substitutes the rest of the year, that's not true during the holidays.

"It's pretty hard to find a replacement for cooking and baking with butter for the holidays," Ruland says.

There is some good news for butter lovers and cooks. Butter production has begun to pick up. The Dairy Association says prices should drop back to normal in January.