Food companies are facing rising prices on dairy products, a cost that may eventually depress their profits, even if some of it will be passed on to consumers.

Wholesale prices on the Chicago Mercantile Exchange for butter are currently around $1.52 per pound after jumping 16% from May's level of $1.35. Barrel cheddar spot prices soared about 13% to $1.67 per pound during the same period.

The reasons are many, including unseasonably warm weather, rising exports and the surging popularity of butter, which some people argue is more healthful than substitutes such as margarine.

"Dairy prices have rebounded quite dramatically over the past six weeks," said Dave Kurzawski, a dairy and commodity analyst at FCStone Advisory. "It should be a beacon to food companies and investors alike." Kurzawski added, "Overall, you are in the foothills of a bigger price raise for dairy going into 2013."

Part of the problem is that the dairy business has been depressed for years and few new dairies have been built as farmers have found row crops such as corn to be more profitable, according to Kurzawski.

If this trend holds, it could prove problematic for a host of companies such as Kraft (KFT), whose products include Oreo cookies and macaroni and cheese; Hershey (HSY), the iconic chocolate maker; and Papa John's International (PZZA), which operates about 4,000 restaurants in 50 countries. With the exception of Kraft, shares of these companies are up by double-digit percentages this year. Investors, it appears, aren't factoring in rising prices yet.

Food companies and other large buyers of commodities hedge their exposure to price increases through the futures market, so the impact may not be felt immediately. Moreover, prices  for dairy products are down from where they were a year ago because there was an unexpected surge in domestic milk production, according to Peter Vitaliano, an economist at the American Butter Instititute and the National Milk Producers Federation.   

"Last summer, the wholesale price of cheese was well over $2," he said.  "We're getting back to a  little more realistic break-even prices for both cheese and butter. Earlier, they were not sustainable. . . . Right now, we don't look like we are going back to 2011 high levels, but we are going to higher than where we had been over the past two or three months." 

Perhaps the biggest irony in this story is how butter is emerging as a "health food." As Advertising Age noted recently, market researchers expect butter volumes to jump 10% from 2011 to 2016, while sales of margarine will continue to fall.