- Global milk overproduction and falling demand led to a sharp collapse in butter prices in 2025.
- Europe is losing its competitiveness due to high costs and the unfavourable euro-dollar exchange rate.
- The US and New Zealand maintain their dominant role in exports, although they are also struggling with oversupply pressure.
- Market normalisation will only be possible after a global reduction in milk production and the adjustment of supply to real demand.
The pace of change in the butter market in 2025 surprised even experienced industry players. At the beginning of the year, it seemed that high butter prices would remain stable for a long time and producers would be satisfied with record margins. However, in just a few months, the situation took a 180-degree turn, with prices plummeting to levels not seen in years, and the collapse of butter also dragging down other products. Such a sudden change showed how sensitive the market remains to global fluctuations and how misleading forecasts can be.
Market dynamics
The year 2025 brought a sudden and unexpected collapse to the global butter market. Overproduction of milk in the US, Europe and Oceania coincided with weakening demand, which quickly led to an imbalance and a sharp price correction. At the beginning of the year, the market was still at record levels and producers were enjoying high margins, but in the second half of the year the situation changed radically.
Globally, butter prices fell rapidly. In September 2025, prices were already 22% lower than in January. At the Global Dairy Trade auction on 16 September, the overall index fell by 0.8% and the average price of butter was £6,892 per tonne. In Europe and Oceania, an additional sign of pressure is the fact that prices in the middle of the year fell by 0.6% month-on-month, reflecting growing competition from cheaper suppliers.
The market has reacted sharply in recent weeks. Dairies, which had maintained high margins for a long time, were forced to quickly adjust their offers. As a result, the price bubble burst and the dairy sector found itself in a completely new reality, in which competitive pressure and geopolitical risks, including possible trade tensions with the US, play a key role.
Regional analysis of the butter market
Europe
Europe found itself in a particularly difficult situation in 2025. Oversupply of milk, combined with weakened consumer demand, increased pressure on prices and limited export opportunities. An additional burden was the unfavourable exchange rate of the dollar against the euro, which reduces the attractiveness of EU butter on global markets. Increasing competition from cheaper suppliers in the US and Oceania means that EU exporters have less and less room for expansion.
There is no shortage of challenges on the internal market either. High retail prices are prompting some consumers to choose cheaper alternatives, such as vegetable oils or plant-based products. The United Kingdom remains one of the main buyers of EU butter, but growing price pressure is limiting the potential for further sales growth.
North America
In the United States, 2025 saw an increase in butter production, but the surplus supply quickly translated into a decline in domestic prices. Initially, this favoured export expansion. American butter gained market share in Asia and the Middle East, but global overproduction limited the potential for further sales. The trade policy of Donald Trump’s administration remains an additional source of uncertainty. Announcements of new tariffs on dairy products increase the risk of an escalating trade war, which could significantly affect the further development of the American sector.
Canada, whose market is heavily regulated, maintains a stable domestic situation, but its role in global trade remains marginal.
Oceania
New Zealand maintains its dominant position in global butter trade, although export performance in 2025 is increasingly dependent on slowing demand in Asia. In the year ending March 2025, the value of exports of butter, fats and creams increased by 7.1% year-on-year, with China remaining the main recipient. However, GDT auctions show a clear price correction. In September, the average price of butter fell to $6,892 per tonne, signalling oversupply pressure in the global market.
Australia is facing a significant weakening of the sector. Milk production in July 2025 amounted to 556.1 million litres, 4% less than a year earlier, and butter exports in the same month reached only 955 tonnes, a decline of more than a third year-on-year. Lower domestic milk supply limits the potential for increasing presence in foreign markets and widens the competitive gap with New Zealand.
Asia
China remains a key driver of global butter demand in 2025, but import growth is slower than in previous years. Domestic production capacity is growing, but still cannot keep up with the needs of the bakery and catering sectors, which treat butter as a premium product. At the same time, it is becoming increasingly clear that, with global milk overproduction, the Chinese market is beginning to become saturated. Additional supplies are encountering absorption barriers, and importers are making more cautious purchasing decisions.
In Southeast Asian countries such as Malaysia and Indonesia, demand for butter continues to grow, supported by the popularisation of the Western lifestyle and the development of coffee shop chains, although the pace of growth is moderate. India and Pakistan are increasing their consumption of milk fats, but the main product there remains traditional ghee, rather than butter in international terms.
Middle East and North Africa
The region remains dependent on imports, with Saudi Arabia reducing its purchases from the European Union in favour of supplies from New Zealand and the United States. The region’s high sensitivity to price differences means that supply directions change rapidly depending on the current competitiveness of individual exporters.
Trends and forecasts
The most important phenomenon on the butter market in 2025 is no longer the record price boom, but the rapid bursting of the bubble and a quick correction in value. Global milk overproduction, weakening consumer demand and increasing competitive pressure have led to a situation where prices have fallen to levels not seen in years within a few months. As a result, the dairy sector finds itself in a new reality where stability and predictability have been replaced by high volatility and uncertainty.
In the coming quarters, three key factors will determine the shape of the market: the pace of production adjustment to real demand, the scale of the slowdown in Asia, especially in China, and the direction of US trade policy. The market is overshadowed by the risk of a tariff war, which could further disrupt commodity flows and change the global trade map.
Medium-term forecasts indicate that butter prices may remain under pressure until there is a real reduction in supply or a rebound in demand in Asia. New Zealand and the US will continue to play a dominant role in exports, while Europe, burdened by high costs and an unfavourable exchange rate, will struggle to remain competitive.
In the long term, OECD-FAO analysts maintain their forecasts for growth in global consumption of dairy products, including butter, particularly in Asia and Africa. However, the current correction shows that the sector’s development path will be much more volatile, and butter will remain particularly sensitive to economic fluctuations and changes in consumer preferences.
For many months, dairies artificially kept butter prices high, taking advantage of record margins, but the market was not fooled and the bubble finally burst. It took just four weeks for prices to fall to levels not seen in years. This collapse was not due to a single factor, but to a whole puzzle: milk overproduction in the US, Europe and Oceania, weakening global demand, the unfavourable euro-dollar exchange rate and the risk of trade wars. The current situation shows that the butter market is much more sensitive and unpredictable than it seemed until recently, and its balance can collapse in a surprisingly short time. Market normalisation in the coming months will only be possible thanks to a global reduction in milk production, which requires maintaining lower raw material prices, adequate to the current market situation. This process is already underway and is visible on spot markets, where milk prices have fallen to 40 cents per kilogram,
Global reports by Foodcom S.A.
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