208 THE BUTTER INDUSTRY IN UNITED STATES [432 



the demand for butter or for a fat to be used as a spread 

 for bread is relatively stable. 



Diagram XII. is presented to locate at a glance the periods 

 of prosperity and depression, the points of high and low pro- 

 duction of butter, and the fluctuations in the price. With 

 the exception of the three years, 1891 to 1893, when pro- 

 duction was comparatively low, there is a very close direct 

 correlation between the price level of all commodities and 

 the price of butter. In fact this correlation is closer than 

 the inverse correlation between the supply and price. Fluc- 

 tuations of the general price level are caused principally by 

 business conditions. Prices begin to fall when crises occur 

 and usually reach their lowest point toward the close of the 

 " subsequent period of depression ", 1 They rise during 

 periods of prosperity. The price of butter seems to be es- 

 pecially sensitive to these business cycles. The consump- 

 tion of butter does not decrease during times of depression. 

 The facts charted on diagram XL, showing the consump- 

 tion of oleomargarine in the United States, seems to indi- 

 cate that the consumption of butter tends to decline during 

 periods of prosperity and high prices, and to increase during 

 periods of depression and low prices. Oleomargarine takes 

 the place of butter when prices are high and gives way to 

 butter when prices are low. 



The evidence seems to show that fluctuations in the sea- 

 sonal price are determined mainly by changes in the amount 

 produced. Long-period fluctuations in the price also cor- 

 relate somewhat closely with long-period changes in the 

 amount produced. Fluctuations in the annual average price, 

 however, are due to changes in the supply of butter and 

 oleomargarine on the one hand and to business conditions 

 on the other, the dominant force being business conditions. 



1 W. C. Mitchell, Business Cycles, p. 558. 



