Butter

Butter is concentrated milk fat, and its market is shaped by one outsized but largely invisible producer. India is the world's largest butter producer at over 7 million tonnes, roughly 39 percent of global volume, but almost all of it is ghee, clarified butter made and consumed domestically, so it barely touches world trade. The internationally traded butter market is effectively a contest among the European Union (about 2.1 million tonnes), the United States (about 0.9 million), and New Zealand (about 0.45 million but the leading exporter).

The defining recent event was the 2024 European butter spike. EU wholesale butter surged nearly 50 percent over the course of 2024 to an all-time high near 8,150 euros per tonne in September, on a shortage of milk fat: declining butterfat content in raw milk, a contracting herd, bluetongue virus in cattle, and weak farm margins, all against firm demand. On the GDT auction butter reached about 7,350 US dollars per tonne, topping the 2022 record. Prices then eased through 2025 into 2026, falling toward 4,800 euros by early 2026, roughly a third below the peak.

In the US class system butter, together with nonfat dry milk, sets the Class IV milk price, and the CME Cash-Settled Butter future and daily CME spot butter market are the reference points, though both are far less liquid than cheese and Class III. US butter trades in a structurally separate and generally lower band than Europe, around 2.50 to 3.00 dollars per pound through 2024 and 2025, which is why the European shortage barely registered in American prices.

Butter's great rival is margarine, and the first thing to know is that margarine is not made from butter at all, it is its substitute. It was invented in 1869 by the French chemist Hippolyte Mege-Mouries, who won a prize offered by Napoleon III for a cheap, keepable butter substitute. The motive was practical, not culinary: butter was scarce and expensive in a fast-urbanizing France, it spoiled quickly without refrigeration, and the Emperor wanted a stable, affordable fat to feed the army and navy and the urban poor, with war against Prussia looming. The original was churned from beef tallow, but modern margarine is made almost entirely from vegetable oils, palm, soybean, and rapeseed, hardened by hydrogenation or interesterification, emulsified with water, colored yellow, and fortified with vitamins. So margarine is really a product of the vegetable-oil complex, not the dairy one, which is why its cost tracks palm and soybean oil rather than milk.

People reach for margarine for three reasons: it is cheaper than butter, it is spreadable straight from the fridge, and for decades it was marketed as the heart-healthy choice, lower in saturated fat and free of cholesterol. That health halo flipped: the trans fats created by old-style hydrogenation turned out to be worse for the heart than butter's saturated fat, and once that became clear in the 2000s, makers reformulated to remove trans fats and butter staged a comeback. There is also a long history of conflict: dairy lobbies fought margarine for a century with taxes and bans, and in much of the United States margarine could not legally be sold dyed yellow until the mid-twentieth century (Wisconsin held out until 1967), so it was sold white with a capsule of coloring to knead in by hand. Today margarine and butter simply split the spread market between price and dairy-fat preference.