Butter prices hold as supply squeezes

Butter prices in the EU have soared to historic highs, driven by tight milk supplies and strong consumer and export demand. While production remains constrained by structural and climatic challenges, domestic consumption is holding firm, fostered by trends favoring natural, high-fat foods. At the same time, shifting trade dynamics, US tariffs, and challenging pricing conditions between major exporters are reshaping global competitiveness. Based on DCA Market Intelligence benchmarks, this report explores how supply limitations, resilient demand, and volatile trade conditions are converging to create a high-stakes environment for the EU butter market.According to DCA Market Intelligence benchmarks, lactic butter reached €7,385 per ton on May 27, marking an increase of 3.14% from the previous month and 10.55% compared to the same period last year.Throughout 2024, butter prices steadily climbed and peaked at €8,165 per ton on November 12, the highest recorded value for this benchmark. Since then, prices have eased, weighed down by rising milk volumes associated with the spring flush. However, declining milk output in the EU and market sentiment suggest that price floors for the year may already have been established.Downward production trend in the EUEU butter and dairy spread production reached 2.06 million tons in 2024, a slight 0.24% decrease year-over-year and a 2.06% decline from 2020.The EU-6 countries account for most of the EU output in the EU. Source: DCA Market Intelligence & EurostatMost of the output is concentrated in the EU’s six leading dairy-producing countries: Germany, France, Ireland, Poland, and the Netherlands. Notably, Belgium has increased its production share, surpassing the Netherlands last year.In early 2025, the European Commission reported a year-to-date (YTD) production of 529,000 tons through March, representing a 0.19% year-over-year increase. This modest increase was led by Germany (6.86%) and Italy (3.67%), while declines were noted in Belgium (7.51%), France (1.28%), Ireland (1.5%), the Netherlands (11.2%), and Poland (0.6%).Milk production continues to be constrained by falling dairy cow numbers, disease outbreaks, and extreme weather events, including droughts and heavy rainfall. Additionally, a 0.6% increase in EU cheese production in 2024 further diverted milk away from butter and powder processing.TradeThe global butter trade is led by the EU and New Zealand, both of which reported price increases over the past year. Among major exporters, only the United States registered a decline in butter prices. As of mid-May, US butter was priced 25.1% below New Zealand and 27.9% below EU butter, highlighting the US’s growing price competitiveness despite its lower fat content.New Zealand, the world’s largest butter exporter, saw exports decline by 3.03% year-over-year to 258,873 tons, according to UN Comtrade. China was its primary destination, together with Australia, the US, and Saudi Arabia.Overall, the Chinese demand remains strong, driven by the Increasing consumption of Western-style baked goods in the middle class. With China depending heavily on imports to meet butter demand, the market remains sensitive to international price movements.EU exports performanceAccording to the Comext database, EU butter exports to non-EU countries declined by 2.96% in 2024, reaching 246,608 tons. However, the rise in butter prices drove export value up by 11.7%, totaling €1.83 billion. Ireland, France, and the Netherlands were the leading exporters, together accounting for 72.1% of export value. Primary extra-EU destinations included the US, UK, China, South Korea, and Saudi Arabia, representing 63.7% of extra-EU export value.Despite being a major exporter, a larger share of EU butter is traded internally. Intra-EU exports represented 38.7% of EU production in 2024, compared to 12% for extra-EU exports. However, intra-EU volumes declined by 5.5% to 796,524 tons, while export value rose 14.23% to €4.97 billion. The main destinations were France, the Netherlands, Germany, Belgium, and Italy, representing 74.2% of the intra-EU export value.Notably, internal demand appears more price-sensitive, as indicated by a stronger price elasticity (-0.26 vs. -0.2) compared to extra-EU markets. Even so, the relative stability in traded volumes despite rising prices highlights the overall resilience of demand.The EU internal butter market is much larger than the. Source: Comext databaseThe US: Both exporter and export destinationThe US remains both a key butter importer and exporter. It imported 84,750 tons of butter in 2024 (+40.93% year-over-year), while exporting 31,325 tons (+2.6% year-over-year). Most US exports are directed to Canada, Korea, Mexico, Panama and the Philippines.On the import side, Ireland alone supplied 66.2% of US butter imports, highlighting American consumers’ preference for European-style butter, which exhibits a higher fat content, richer flavour, and creamier texture. New Zealand followed with 21.4% of total imports.In April, the US imposed a 20% tariff on most EU imports. However, dairy exports were not included in the list of products affected by tariffs after intense negotiations with representatives from the Irish dairy industry. The representatives said that a 20% tariff would place in a precarious position, New Zealand faces a 10% tariff. However, the US government has also threatened to raise tariffs on EU dairy imports to 50% in July, raising uncertainty of whether the dairy industry would be included in this batch of measures. Nevertheless, given strong brand loyalty and sustained consumer demand, EU butter imports are unlikely to halt entirely.Butter is increasingly popular among consumersDemand for butter in the EU remains strong, both domestically and internationally. Despite elevated prices and a decline in export volumes, higher prices have pushed up export values, indicating continued interest from premium markets.On the consumer front, preferences are shifting towards natural, less-processed foods. Butter, especially from grass-fed cows, is increasingly seen as a desirable alternative to industrial spreads. This aligns with nutritional trends, which are shifting towards a higher fat intake and more relaxed earlier restrictions on saturated fats. Medical studies and evolving nutrition guidelines have contributed to a renewed acceptance of butter as part of a balanced diet.Additionally, the rise of home cooking and artisanal baking has also played a role, further embedding butter as a staple in European kitchens. These trends, coupled with the sensory qualities and versatility of butter, support a consistent demand for butter. While high prices may drive substitution among price-sensitive consumers, the underlying demand for butter remains strong across both retail and industrial segments.ConclusionsThe current EU butter market presents a complex yet strategic landscape. Supply constraints, driven by milk availability, climate impacts, and shifts in processing toward cheese, are tightening the market and underpinning high price levels. At the same time, consumer and export demand remain resilient, with premium segments continuing to perform well.Trade dynamics are increasingly central. The EU’s global competitiveness faces challenges from New Zealand’s cost advantage and mounting US tariffs. However, the internal EU market remains the primary trade channel, underscoring its structural importance.The EU butter demand has been surprisingly inelastic for both the domestic and external markets. This implies that declines in trade volumes have not been proportional to the price increase, resulting in an overall increase in export value.Looking ahead, the short-term outlook points to stable or firm butter prices. Although the seasonal spring flush has exerted some downward pressure, lower production and market sentiment indicate that current price levels likely represent a price floor. Food traders should closely monitor developments in global demand, evolving trade policies, and currency fluctuations, all of which have the potential to rapidly alter trade flows and margins. Staying informed and agile through DCA Market Intelligence’s dairy platform will be critical to navigating the next phase of the EU butter market.Additional referencesEurostat. (2025). EU monthly production of dairy productsMid-West Farm Report. (2025). Natural Trends Boost Butter Demand As We Begin 2025Rabobank. (2025). The effects of Trump’s tariff troubles on EU cheese and butterThe Bullvine. (2025). Tariff Showdown: EU Dairy Faces 20% US Barrier While NZ Gets Half the HeatThe Bullvine. (2025). EU Dairy Prices Plateau: What You Need to Know About The 2025 Market Split The Cattle Site. (2025). The rising demand for milk fat and butter