European Bakers Face Expensive Christmas Season as Butter Prices Hit Record Highs
Source: DairyNews.today
Rising Butter Costs Compound Challenges for Bakers Already Grappling with Surging Chocolate and Sugar Prices
Butter prices across Europe have soared to unprecedented levels in recent months, presenting a major cost challenge for bakers and pastry makers as they gear up for the Christmas season. In addition to the rising cost of chocolate and sugar, the surge in butter prices is set to push production costs higher, with small producers expected to feel the brunt of these increases.
European butter reached a record $8,706 per metric ton by the end of September, an 83% increase year-over-year, according to the European Commission. This rise is attributed to strong demand for butter, low stock levels, and a shift among dairy processors to allocate milk to more profitable products, such as cheese, rather than butter.
“While large food companies have secured much of their butter supply, small producers will face significant challenges this season,” said Paul Boivin, Director of the French Bakers and Pastry Federation (FEB). He added that price increases are inevitable as bakers struggle to keep up with rising costs on multiple fronts.
Global Milk Output Struggles to Keep Pace with Demand
The price surge comes amid broader issues in the dairy sector, with milk production declining last year across key regions, including Europe, the United States, and New Zealand. Many dairy farmers have scaled back due to low prices and high feed costs, impacting global milk output. Although production has seen a slight rebound in 2024, supplies remain tight compared to rising demand, leading producers to prioritize higher-margin products like cheese over butter.
“Global dairy producers are diverting milk to the most competitive products,” said Rabobank dairy analyst Michael Harvey. “This shift has placed additional pressure on butter prices and has been exacerbated by ongoing challenges in milk production.”
In Europe, butter production fell by 1.6% from January 2023 to July 2024, while cheese output rose by 3.2%, reflecting the market’s strategic shift. Similarly, the U.S. Department of Agriculture recently raised its 2024 forecast for U.S. butter prices to $3 per pound, up 15% from last year. The USDA attributes this rise to a combination of lower cow numbers and reduced milk yields per cow, alongside steady demand.
Market Outlook: Disease Concerns and Projected Growth
The global butter market is projected to reach $42 billion in revenues in 2024, reflecting an 8% increase since 2022. Statista estimates that the market will continue to grow by 7% annually through 2029. In Europe, disease outbreaks, including bluetongue and Epizootic Hemorrhagic Disease (EHD), are raising concerns over further declines in milk supply, further supporting high butter prices. While these diseases have affected dairy herds in Western Europe, the impact of avian flu on U.S. dairy cows has been minimal.
Despite the challenging outlook, industry analysts predict that butter prices could ease in the coming months as dairy producers ramp up production to capitalize on elevated prices. “Producers will respond to the current price environment by increasing output, but we’re unlikely to see significant relief until early next year,” said Susan Kilsby, an analyst at ANZ bank in New Zealand.
For now, bakers and pastry makers in Europe will need to navigate these escalating costs as they prepare for the busy holiday season, with the rising cost of butter adding to the financial pressures they already face. As the industry braces for a costly Christmas, many are looking to the government and industry stakeholders for support to sustain small producers through these turbulent times.
European butter reached a record $8,706 per metric ton by the end of September, an 83% increase year-over-year, according to the European Commission. This rise is attributed to strong demand for butter, low stock levels, and a shift among dairy processors to allocate milk to more profitable products, such as cheese, rather than butter.
“While large food companies have secured much of their butter supply, small producers will face significant challenges this season,” said Paul Boivin, Director of the French Bakers and Pastry Federation (FEB). He added that price increases are inevitable as bakers struggle to keep up with rising costs on multiple fronts.
Global Milk Output Struggles to Keep Pace with Demand
The price surge comes amid broader issues in the dairy sector, with milk production declining last year across key regions, including Europe, the United States, and New Zealand. Many dairy farmers have scaled back due to low prices and high feed costs, impacting global milk output. Although production has seen a slight rebound in 2024, supplies remain tight compared to rising demand, leading producers to prioritize higher-margin products like cheese over butter.
“Global dairy producers are diverting milk to the most competitive products,” said Rabobank dairy analyst Michael Harvey. “This shift has placed additional pressure on butter prices and has been exacerbated by ongoing challenges in milk production.”
In Europe, butter production fell by 1.6% from January 2023 to July 2024, while cheese output rose by 3.2%, reflecting the market’s strategic shift. Similarly, the U.S. Department of Agriculture recently raised its 2024 forecast for U.S. butter prices to $3 per pound, up 15% from last year. The USDA attributes this rise to a combination of lower cow numbers and reduced milk yields per cow, alongside steady demand.
Market Outlook: Disease Concerns and Projected Growth
The global butter market is projected to reach $42 billion in revenues in 2024, reflecting an 8% increase since 2022. Statista estimates that the market will continue to grow by 7% annually through 2029. In Europe, disease outbreaks, including bluetongue and Epizootic Hemorrhagic Disease (EHD), are raising concerns over further declines in milk supply, further supporting high butter prices. While these diseases have affected dairy herds in Western Europe, the impact of avian flu on U.S. dairy cows has been minimal.
Despite the challenging outlook, industry analysts predict that butter prices could ease in the coming months as dairy producers ramp up production to capitalize on elevated prices. “Producers will respond to the current price environment by increasing output, but we’re unlikely to see significant relief until early next year,” said Susan Kilsby, an analyst at ANZ bank in New Zealand.
For now, bakers and pastry makers in Europe will need to navigate these escalating costs as they prepare for the busy holiday season, with the rising cost of butter adding to the financial pressures they already face. As the industry braces for a costly Christmas, many are looking to the government and industry stakeholders for support to sustain small producers through these turbulent times.
