The butter price crash: Winners, losers and what comes next

Butter prices have faced a bearish trend since late 2025, pressured by exceptionally high milk production across key exporting regions. Despite signs of recovery in March 2026, globally, prices remain down by around 22% year on year on average, based on the latest AHDB World Wholesale Prices data.

This is placing margin pressure on producers, who are being squeezed at the farmgate as the industry corrects following last year’s elevated price environment.

But who benefits from the current situation – and what are the implications for those that are disadvantaged by the butter price collapse?

Low butter prices: A ‘gift’ for bakers

According to Jasper Endlich, dairy analyst at Vesper, several industry players are benefitting from the ongoing market dynamics. “The lower butter prices are a ‘gift’ for many large industrial buyers, such as bakeries, who are buying butter well into 2027 already to lock in a relatively low price for their butter,” he told us.

“Butter volumes sold to retail customers are also picking up again as retail prices are falling – down to €5.80/kg in Germany already. It’s a slower process, but it’s taking place since the start of this year.”

This suggests industry players across foodservice, manufacture and ingredients may experience long-term relief from the pricing pressures of the near past.

In 2023 and 2024, high butter prices meant bakers, confectioners and food manufacturers struggled to pass costs on, while in retail, consumers down-traded to private label brands while branded butter struggled to achieve volume growth – with some premium brands shrinking pack sizes to protect margins and keep costs manageable for consumers.

Farmers feel the pinch

On the other end of the supply chain, dairy farmers and processors are increasingly squeezed by the butter price decline.

“Falling butter prices have quite a negative effect on milk prices, so farmers have already started to feel their margins shrink,” Endlich said. “However, milk prices such as FrieslandCampina’s April milk price of €41.5/100kg or Fonterra’s 2025/26 milk price of $9.7/kgMS are still seen as generously high for farmers.

“Co-operatives and processors aren’t in a great spot either, as the price they pay for milk is high while the return on butter isn’t as high as it used to be. Unfortunately, with the milk output as high as it is today, they have to choose between producing storable dairy commodities or selling the raw milk to another processor at half the price.”

Are fats facing a long-term volume and price decline?

Butter prices are showing some signs of short-term recovery, with prices across Oceania, the US, and Europe notching up month on month in March, according to AHDB’s World Wholesale Prices data.

But in the long run, the change could be structural and more embedded as processors increasingly route more milk solids toward cheese and whey production. This is driven in large part by protein trends and the production of value-add whey ingredients.

“The combination of cheese and whey is making up a bigger share of the product mix in recent years, at the expense of butter and milk powder,” Vesper’s Endlich explained.

“Today’s high production of butter and milk powder is mainly due to the large milk surplus, combined with capacity constraints on other high-value dairy products. Once milk is in shorter supply again, we would likely see the share of milk put into butter and milk powder shrink much faster than in cheese and whey.”

Low commodity prices are already putting pressure on margins and production levels – meaning that as the year progresses, butter production is likely to normalise, potentially paving the way for price corrections.

But in the meantime, the butter market remains caught between short‑term relief for buyers and ongoing pressure on producers.