Global butter prices crash to two-year low as production surges
Global butter prices have slumped 34 per cent in six months as milk production surges worldwide, spelling trouble for Australian dairy farmers.
Global butter prices have fallen off a cliff, from almost $US8000 a tonne six months ago to a two-year low of $US5169/t this week.
The New Zealand Global Dairy Trade auction price for butter dropped 12.4 per cent in the past fortnight alone, following earlier drops in Europe and the US.
Rabobank senior analysts Michael Harvey said global production was on the rise, as the impacts of bird flu in the US and blue-tongue in Europe eased, while New Zealand production took off.
Up until recently butter was one of the commodities in shortest supply, Mr Harvey said.
But as production recovered across the globe, he said more milk was being directed into butter and skim milk production, lifting supply.
The US Department of Agriculture’s latest dairy forecast states “milk production for 2025 is projected at 230.0 billion pounds, up by 0.8 billion pounds from the last forecast”, due to an increase in both the average number of cows and milk per cow.
While most production is consumed locally, the USDA estimates the nation will finish the year having exported the equivalent of 15.6 billion pounds (on a milk-fat basis) of the nation’s production, up a billion pounds on 2024.
The USDA also expects that lower feed costs in the second half of 2025 will lead to a “further expansion of the number of milk cows in 2026”, averaging 9.475 million head.
Across the ditch in New Zealand Fonterra chief executive Miles Hurrell last week told suppliers “we’ve seen strong milk flows this season, both here in New Zealand and other milk producing nations.
“This increase in milk supply has put downward pressure on global commodity prices, with seven consecutive price drops in recent Global Dairy Trade events (now eight, as of this week).
“As a result, we have narrowed the forecast Farmgate Milk Price range for the season and adjusted our midpoint (from $NZ10/kg of milk solids to $9.50/kgMS)”.
The global surge in production does not bode well for Australian farmers, given their own industry’s peak research and development body reported this week that persistent cost pressures, a smaller national herd and continued farm exits would likely see Australian milk production drop 2 per cent in the 2025-26 season.
Australian Dairy Farmers president Ben Bennett said “if we go by that and prices falling overseas it’s not a good look”.
While 70 per cent of Australian milk goes into the domestic market, supermarkets will be keeping a close eye on global prices given the ease with which they can swap locally manufactured butter and cheese with imports.
Coles is maintaining a price of $4.80 for its 250 grams blocks of Australian house brand butter, while Woolworths sells blocks of US butter under its Hillview brand for $4 and Aldi local 250g blocks for $3.69.
Rabobank senior analysts Michael Harvey said Australia’s open markets meant the latest global butter price drop would soon bring further relief to consumers facing the cost of living crunch.
