Butter prices have surged dramatically in recent months, reaching record levels across Europe, which is bad news for bakers and pastry chefs preparing for the Christmas holidays and already facing high costs for chocolate and sugar, reports the agency..
According to analysts, strong demand for butter, low stock levels, and the preference of dairy processors to use more milk for more profitable products like cheese have driven this price increase.
On global markets, European butter was trading at a record $8,706 per ton on September 29, up 83% from the previous year, according to the latest official data from the European Commission.Prices were also higher compared to last year in Australia and New Zealand, although they had decreased from summer highs.
While major food companies have largely secured their butter supplies ahead of the Christmas cake and ice cream production, the impact on small producers will be significant, and a price increase is inevitable, said Paul Boivin, director of the French Federation of Bakers and Pastry Chefs (FEB).
Milk Production Challenges
Milk production fell last year in most regions of the world, including Europe, the United States, and New Zealand—the largest exporter of milk and butter in the world—due to low prices and high feed costs, which discouraged many farmers.
Global milk production has slightly rebounded in 2024, but it remains insufficient compared to rising demand, prompting producers to allocate milk to more competitive products like cheese instead of butter, explained Rabobank analyst Michael Harvey.
Milk production in the EU increased by 0. 7% from January 2023 to July 2024, according to the latest EU data.During the same period, butter production fell by 1. 6%, while stocks were at historically low levels and cheese production rose by 3. 2%.
The U.S.Department of Agriculture (USDA) raised its forecast for butter prices in 2024 this month to $3 per pound, which is 15% higher than last year, due to a declining number of cows and reduced milk production per animal.
‘Limited milk supplies and strong demand will keep the price outlook high into 2025,’ said the USDA.
The Global Butter Market is a Multi-Billion Dollar Industry
Global butter market revenues are estimated to reach $42 billion in 2024, an increase of over 8% from 2022, and the market is expected to grow annually by 7% until 2029, according to the data platform Statista.
Butter prices in Europe have also been partially supported by concerns about a further decline in milk supplies due to the spread of diseases among cows in Western Europe, including bluetongue and epizootic hemorrhagic disease (EHD), analysts said.
However, the number of avian flu outbreaks in cows in the U.S.has not been significant enough to affect national milk production, noted USDA economist Michael McConnell.
Butter prices are expected to decrease from record levels as dairy producers increase their output to capitalize on high prices, but it may take several months for a significant decline to be observed, said Susan Kilsby, an analyst at ANZ Bank in New Zealand.