Butter Prices Soar to Record Highs Globally
Butter has reached historical prices globally, driven by a decline in global milk production and fierce competition for dairy fat.
The global dairy industry is facing unprecedented pressure in the value chain of one of its most prized products: butter. According to the Food and Agriculture Organization of the United Nations (FAO), the global butter price index has reached its highest point in history. This increase is significant; in the most recent Global Dairy Trade auction, the product was priced at over $7,200 per ton, representing an increase of more than 50% in just two years.
The issue begins at the source: the global supply of milk has decreased. The dairy industry worldwide has been affected by the reduction of dairy cow herds, a phenomenon caused by prolonged droughts and disease outbreaks. Projections for this year are bleak, with milk production growth in the five main producing regions—the European Union, United States, New Zealand, Argentina, and Australia—expected to be less than half a percentage point.
This raw material shortage is exacerbated by demand dynamics and processing. Within the dairy value chain, priority is given to producing products such as fluid milk, yogurts, and cheeses, leaving butter behind. Meanwhile, there has been a surge in demand for higher-fat dairy products, driven by consumer preferences in regions like the United States, the Middle East, and Asia, putting additional pressure on cream availability.
Moreover, the butter market is facing unexpected competition from whey protein. Once a byproduct of cheese-making, it has become a lucrative industry on its own. The value of whey protein encourages processors to prioritize cheese production, reducing the amount of cream available for butter production and creating a supply bottleneck that directly contributes to price increases.
The rising butter prices will have repercussions beyond producers and processors. The bakery and confectionery industries, already contending with high prices of other raw materials like cocoa, will be impacted. Ultimately, production costs will likely be passed on to consumers, making previously affordable treats like golden, crispy croissants a luxury, reflecting the complex and volatile situation of the global dairy industry.
