Butter in short supply: What’s fueling the 2025 price spike?

Global butter prices have hit record highs in 2025, driven by supply constraints, extreme weather, disease outbreaks, and a shift in dairy production toward more profitable cheese. Europe and New Zealand, which account for 70% of global exports, are seeing declining butter output. Meanwhile, demand is rising sharply, especially in Asia, led by China and India. In Western markets, butter is making a comeback, but soaring prices are forcing changes in usage. With ongoing environmental and geopolitical pressures, experts expect continued price volatility and elevated costs into 2026 and beyond.

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Butter prices have hit all-time highs in 2025, fuelled by a convergence of global supply chain disruptions, escalating demand, and growing geopolitical and environmental pressures. Providers are now charging 25% to 30% more, squeezing both consumers and food businesses that rely on this essential dairy product.

The roots of the crisis lie deep within the global dairy sector, which is buckling under growing constraints. Across major producing regions—particularly Europe, the United States, and New Zealand—milk production is under intense strain due to extreme weather events, regulatory changes, disease outbreaks, and strategic shifts within the industry itself.

Milk production has been heavily impacted by adverse climate conditions. Droughts in California and unseasonal frosts across Europe have slashed yields, making it more difficult for dairy farmers to sustain output. At the same time, increasingly strict environmental regulations in the EU and U.S. are pressuring farmers to cut herd sizes.

But that is not the only issue. Dairy processors themselves are pivoting away from butter production in favor of cheese, which offers higher margins and greater commercial value. This strategic shift is reshaping the entire dairy supply chain—and not in butter’s favour.

Butter is made by separating cream from raw milk and churning it. This process yields two products: butter and buttermilk. While butter remains a staple ingredient, buttermilk has limited commercial appeal. It is used in some cooking, a few dairy derivatives, and livestock feed—but unlike cheese by-products, it does not fetch high returns.

Cheese production, on the other hand, utilizes the full volume of milk and generates whey as a by-product—an ingredient in high demand across fitness, food processing, and nutrition industries. From protein powders to processed foods, whey has become a valuable commodity. For processors chasing profitability, shifting milk fat toward cheese simply makes more economic sense.

As a result, the European Union has increasingly favored cheese production, and butter output has steadily declined. According to the U.S. Department of Agriculture (USDA), EU butter production is expected to reach an eight-year low in 2025—a development with global consequences.

Europe and New Zealand—together responsible for around 70% of the world’s butter exports—began 2025 with some of their lowest inventories in recent memory. The Food and Agriculture Organization (FAO) has cited these shortfalls as a major factor behind recent price spikess.

It is to be noted here that, global export of butter has increased from US$ 6.4 Billion in 2020 to US$ 10.3 billion in 2024, with CAGR at 9.9%. Ireland, Netherlands, New Zealand, Germany and France are among the leading exporters of Butter in the world. Major importing countries include France, Netherlands, Germany, China, and United States of America. 

Source: ITC Trade map

The origin of this supply squeeze at present dates back to 2022, when inflation, soaring energy costs, and rising feed and fertilizer prices drove up milk production costs. In response, dairy producers across Europe began prioritizing cheese, further reducing butter availability.

Making matters worse, European dairy farms are also grappling with shrinking herd sizes and the spread of animal diseases such as bluetongue virus and lumpy skin disease, particularly in key dairy hubs like France and Italy. These outbreaks are cutting into milk yields at a time when every liter counts.

New Zealand, another critical player in global butter exports, has seen its production stagnate since the pandemic. Annual butter production in the country has hovered around 500,000 tons since 2020. 

While supply tightens, butter demand is accelerating—especially in Asia, where changing dietary preferences and growing disposable incomes are reshaping consumption patterns. The USDA projects a 2.7% rise in global butter consumption in 2025, outpacing production growth. In China alone, butter demand rose by 6% in the past year, while Taiwan and India followed closely with 4% and 3% increases, respectively. 

In 2024, the global butter market was valued at US$ 58.48 billion. According to report by Market Research Future, it is anticipated to grow from US$ 61.56 billion in 2025 to US$ 104.87 billion by 2035, reflecting a compound annual growth rate (CAGR) of 5.54%, during the forecast period 2025–2035.

Source: Market Research Future

Bakeries and food businesses across Asia are feeling the pinch. Many are emphasizing the need for high-quality butter, preferring New Zealand suppliers while avoiding Chinese sources over quality concerns. Still, supply volatility has forced them to cycle through multiple vendors—switching between producers in Australia, Belgium, and New Zealand as they scramble to keep up with demand.

Western consumers are also rediscovering butter, embracing it as a more natural and traditional alternative to margarine and processed oils. In the UK, sales of pure block butter have been steadily rising, according to Susie Stannard of the Agriculture and Horticulture Development Board.

However, this renewed enthusiasm comes at a cost. For instance, an upscale restaurant in London, Morchella, has begun replacing butter with olive oil to reduce expenses. Whereas some others are scaling back butter use in sauces and meat preparations, citing unsustainable prices.

This marks a significant turnaround in public sentiment. Once criticized for its saturated fat content, butter is now celebrated for its wholesome image—yet it is increasingly becoming a luxury ingredient.

Looking ahead, the outlook remains grim. Butter prices remain highly vulnerable to shocks from climate change, international trade tensions, and geopolitical instability. A looming heatwave in Europe threatens to reduce milk yields even further during the crucial summer season—coinciding with seasonal spikes in demand for cream-heavy products like ice cream and traditional dishes such as strawberries-and-cream.

In response, bakeries and retailers are adjusting strategies. Some are absorbing higher costs to avoid alienating customers, while others are exploring regional suppliers to mitigate risk. But unless market conditions change significantly, industry experts warn that consumers should brace for further price hikes in 2026 and beyond.