Butter Prices Explained

Dry weather systems and the increased production cost contributed to the tailwind of butter prices. The Agriculture and Horticulture Development Board (AHDB) reported that European butter posted an 18.5% increase in its year-on-year data. 

The warming temperatures during spring and summer reduced the availability of grass for cows to eat, influencing their milking capacity. This translated to farmers buying additional feed to sustain their cows. Additionally, the fluctuating energy prices made dairy processors and retailers increase the commodity’s value to compensate for the production value.

Why are butter prices fluctuating?

1. Cost Production Due to Extreme Weather Systems

Butter cost production increased as the extreme global drought affected top butter-producing countries.

The summer heat caused stress to dairy cows which resulted in a low global dairy supply. Despite efforts to keep their cows cool by providing cooling systems, herds still produce low milk.

Scientists predicted that this climate change will affect the U.S. (third butter-producing country) dairy production by $2.2 billion per year.

On the other side of the world, India the first leading butter producer) steadily experienced a decrease in output as the country suffered extended periods of droughts which lessened its milk production. Thus, these compounding factors greatly shape butter prices.

2. Milk Production

Milk production increased by 0.3% in the second quarter of last year. However, this slight upward production trend can’t accommodate butter production in the coming years as the number of cows steadily declines.

Additionally, the growing feed costs such as corn and bushels, buying and maintaining cows, ongoing labor shortage, and the declining cold storage reserves all contribute to the disruption of milk production which highly affects butter prices.

3. Vegetable Oils

The current war in Ukraine is another butter price determiner. The country is the number one producer of sunflower oil, a highly prized vegetable oil that is the main ingredient in making margarine.

As a result, the shortage of margarine production leads to an increase in butter demand and prices as consumers tend to look for butter as a substitute.

Additionally, the recent elevation of vegetable oil needs comes from sustainable government programs that look to stabilize soaring energy prices by producing biofuel. Thus, the emerging trends and current supply chain issues highly affect butter prices.

Which variables impact the price of butter?

• Cost Production due to Extreme Weather Systems
• Milk Production
• Vegetable Oils
• Increased Demand
• Trade Disruptions

Where does butter come from?

Butter is a dairy product made from the milk of cows, sheep, goats, or yaks. It is a versatile ingredient used in cooking, baking, and as a spread.

Its origin is closely tied to Western civilization; however, some claim that butter was first made in Central Asia or Europe as early as 8,000 BC.

Butter production spread to other parts of the world through trading and colonization. It started in China in the 2nd century BC, to India in the 4th century AD, and to the Americas by European colonists in the 16th century.

Additionally, the earliest method of making butter was simple. People simply churned cream by hand until the fat separated.

The invention of the cream separator in the 19th century brought changes in butter production. This machine allowed people to separate cream from milk much more easily.

Thus, this made butter production more efficient and widespread.

Nowadays, this savory delight is part of our guilty pleasures from our favorite pastries, cakes, and cookies. Furthermore, we have these top butter-producing countries to thank for: India, EU-27, the United States, New Zealand, and Russia.

What is the future price of butter?

Experts predicted a $67.6 billion market value of butter in 2030. These figures stem from the global demand for butter as one of the staple commodities highly used in household cooking and food and manufacturing industries. The rising demand for organic products such as organic butter and the growing population which is the prime mover of commodity prices add value to its marketability.

Additionally, the changing weather systems brought by climate change will largely affect the commodity as the availability of butter depends on the milk production from cows that rely on grazing fields.  Furthermore, the rising health awareness among customers ignites the growth of plant-based butter which will likely stabilize the spiking of butter prices. Thus, the prediction showed that butter prices will be 4656.27 Euros in 2027.