The price of butter has steadily increased in recent years, with an 18.5% year-on-year rise recorded in the EU wholesale market between 2023 and 2024. But why is this happening? And is it a permanent trend? Here is an analysis by DairyReporter.

Why is the price of butter so high?

Whether generously spread on toast or baked into a cake, butter is a staple ingredient in many kitchens worldwide. But in recent years, there has been a noticeable and sustained increase in the cost of butter.

According to the Agriculture and Horticulture Development Board (AHDB), butter prices in the EU have been “rising by 2.4% month-on-month and showing a significant 18.5% year-on-year increase” between 2023 and 2024. So, why has the price of butter increased in recent years, and is this trend here to stay?

The increase in butter prices over the past few years has been the result of several factors affecting the dairy industry, the first of which is political.

“Peaks and troughs in commodity markets such as dairy and in a category like butter are not unusual, but volatility has certainly defined the last four or five years,” Margaret Butler, sector manager for dairy ingredients at the Irish Food Board, Bord Bia, told FoodNavigator.

“The dairy market has been somewhat of a rollercoaster ride over the past two and a half years,” agrees David Swales, head of market intelligence for livestock at AHDB. “This was triggered by the war in Ukraine. Since the start of the war, we have seen a huge increase in energy prices and fertilizer prices.

These increased costs for farmers, dairy processors, and retailers have ultimately been felt by consumers in terms of the cost of products, including butter.

Additionally, extreme weather events have impacted the dairy industry. In 2020, drought affected countries in Europe. This led to a reduction in the grass available for dairy cows to eat.

“We had a very dry summer in 2020,” Swales told FoodNavigator. “Typically, cows go out to pasture in spring and summer, but it was so dry that the grass didn’t grow, so farmers had to feed their cows with silage from previous years and then buy additional feed to sustain their animals.”

A perfect storm

This perfect storm of political and environmental changes led dairy processors to worry that dairy farmers would reduce milk production because it simply wasn’t profitable for them to maintain or increase production levels.

“The market responded to these changes, and the price of milk increased to encourage farmers to produce more milk,” Swales explains. “Then butter, cheese, and other commodities had to raise their prices so processors could maintain profitability.”

In addition to these environmental and political factors, many people in the dairy industry believe that butter is receiving the recognition it deserves as a high-quality product.

“Milk fat and butter have been regaining recognition for their nutritional value for some time,” Alexander Anton, secretary general of the European Dairy Association, told FoodNavigator. “Butter is and always has been a luxury product in terms of quality, taste, and nutrition. Today, it is an affordable everyday luxury product in Europe and large parts of the world.”

“My favorite dairy product is butter. A piece of butter spread over a fresh slice of brown bread is one of life’s simple pleasures,” said Phil Hogan, former European Commissioner for Agriculture and Trade.

Will butter prices continue to rise?

“We have an early indication of future butter costs for consumers by looking at the wholesale market,” Swales explains. “The wholesale butter price has fallen back and is now stabilizing.”

However, we have once again seen extreme weather in the form of heavy rainfall, leading to flooding in many European countries. This has meant that dairy farmers cannot pasture their cows outside because the ground is too wet, and the cows would effectively damage the fields.

As a result, farmers are missing a period known by dairy farmers as “the flush.” The flush is a period of peak milk production when cows are typically outside grazing in the fields, gaining a lot of energy from the grass and producing a lot of milk. Therefore, farmers are waiting to see how much milk they get this year.

“If the wet weather has affected production, then prices are likely to rise, but at the moment, we are expecting the same amount of milk as last year, so it’s stable,” Swales says. “But in the last three months, markets have been well balanced, moving in a straight line and down from where we were a year ago. Regarding retail prices, I don’t see much upward pressure.”

This analysis will come as welcome news for consumers who have seen their budgets stretched during the cost of living crisis. However, if demand for dairy products increases, then the price may rise again.

“We are probably in a plateau period for milk production, certainly from a European perspective. If demand holds up or increases, it should be inferred that commodity prices will hold or rise in tandem to meet demand from a milk pool that is unlikely to see significant increases.”

Others believe that butter prices will remain higher regardless of demand and supply, considering this a more accurate price.

“We don’t have a crystal ball,” says Anton of the European Dairy Association, “but all analysts and outlooks indicate that butter will continue to be traded at its true value – the futures market shows the resilience of today’s market price for the coming months.”

Butter demand will increase across Europe

“Consumers are very price-sensitive at the moment, with the cost of living crisis and in terms of price per kilogram, butter is more expensive than quite a few alternatives in the margarine space, so there is a degree of consumer switching,” says Swales of AHDB.

However, many consumers have continued to buy butter for its superior taste and the fact that it is a natural ingredient, unlike more processed alternatives like margarine.

Additionally, when consumed in moderation, butter offers multiple health benefits. It is a good source of vitamin A, which supports physical development and immune function, and also contains butyrate, a fatty acid that supports gut health.

“We have seen the growing importance that consumers place on health,” Swales explains. “What we are seeing is a big push for naturalness and against ultra-processed foods.”