The price of butter in Europe hit a new record high in September at around $4 per pound (€7,950 per metric ton). The previous high was about $3.60 per pound (€7,478 per metric ton), which was recorded back in June 2022. The bad news is butter prices across the major dairy exporters are much less correlated than powder prices, so it is unlikely the strength in Europe will pull U.S. butter prices up to $4. Still, the high price of fat in the European Union (EU) will be supportive to U.S. dairy prices in a couple of different ways.
With U.S. butter prices at $3.20 (or lower in recent days) and Europe at $4, this will open up some export opportunities for the U.S. In 2023, the 27 EU countries plus the United Kingdom exported about 29% of the globally traded butter and anhydrous milkfat (AMF). Much of their exports go to the Middle East and Northern Africa (Morocco) where they have logistic advantages and long-term relationships. Those buyers have a strong preference for EU fat, but given how wide the price spreads are, we could see a little more U.S. fat going that direction.
Somewhat surprisingly, about 25% of the EU and U.K. butter exports come to the U.S. As far as we can tell, this is primarily branded butter (Kerrygold) coming from Ireland. Kerrygold is the second largest branded butter sold in the U.S. today, with Land O’ Lakes holding the top spot. The fact that EU butter prices are much higher than U.S. prices probably won’t slow the imports into the U.S. much, but it might limit retail promotional prices on the imported butter and maybe help U.S.-produced butter gain a little market share back. At the end of the day, though, I don’t think this will do much to support U.S. butter prices; the impact will just be too small.
Nate Donnay
Sept. 19, 2024
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