Bakers expect a pricey Christmas because of the rising cost of butter

Butter prices have surged to record highs across Europe in recent months, while bakers and pastry makers prepare for Christmas celebrations and already contend with high prices for sugar and chocolate.

Strong demand, limited supply, and dairy processors' propensity to use more milk for the most profitable products, like cheese, are the reasons behind the price hike, according to analysts. By September 29, European butter was trading on international markets at a record $8,706 per metric ton, up 83% year over year, according to the latest official figures from the European Commission. Australia and New Zealand were also seeing annual price increases, but they had fallen from summer highs.

Even though large food companies have already used up the majority of their butter supplies before starting to make Christmas cakes and ice cream, Paul Boivin, director of the French bakers and pastry organization FEB, said small manufacturers would be severely impacted and a price increase would be unavoidable. Last year, milk output fell in most regions of the world, including Europe, the US, and New Zealand, the world's largest supplier of milk and butter, as many dairy producers were discouraged by low pricing and high feed costs.

Despite a 0.7% rise in 2024 milk output, producers had to use milk for competitive goods like cheese since it was not enough to meet demand. Due to limited availability, butter production fell by 1.6% while cheese production rose by 3.2%. According to the U.S. Department of Agriculture, butter prices would increase by 15% to $3 a pound in 2024. By 2024, the global butter market is expected to bring in $42 billion, up 8% from 2022 and growing by 7% a year by 2029.

Analysts claim that diseases affecting dairy cows in Western Europe, such as bluetongue and Epizootic Hemorrhagic Disease, helped to maintain European butter prices to some degree. But there weren't enough bird flu cases in American dairy cows to have an impact on the country's milk supply. Butter prices are predicted to drop from all-time highs as dairy producers boost production, although a significant drop might not happen for several months.