Butter Price Explosion Poses Challenges to the Baking Industry

Butter prices in Europe have reached new record highs in recent months, causing concern particularly among bakers and confectioners. These groups are already under pressure from high chocolate and sugar costs as they prepare for the festive Christmas production. Experts attribute the price increase to strong demand, limited stock levels, and the decision by milk processors to use milk more for more profitable products like cheese. As of September 29, European butter was recorded at a record price of $8,706 per ton on world markets, representing an 83% increase compared to the previous year. Prices in Australia and New Zealand were also higher than last year, although they have moved away from the summer peaks. Large food companies managed to secure themselves in time, but smaller producers are facing a significant price increase. In the previous year, global milk production declined, limiting the availability of butter. Although production recovered slightly, the situation remains tense. Rabobank analyst Michael Harvey observes that milk is increasingly being used for more competitive products, while European milk production rose by only 0.7%, and butter production fell by 1.6%. At the same time, cheese production grew by 3.2%. The US Department of Agriculture has raised its forecast for butter prices, partly due to a decline in milk production per cow. For 2024, global butter sales are expected to reach $42 billion, with worldwide growth of 7% per year projected until 2029. Health risks for cows in Europe, such as bluetongue disease, are further supporting butter prices, while bird flu outbreaks in the US have little impact. The price pressure could ease in the coming months if milk producers ramp up their efforts. However, this is likely to take time, says ANZ analyst Susan Kilsby.