Azerbaijan shifts toward palm oil as butter imports and domestic output decline
Azerbaijan imported less butter and produced less domestically in 2026, even as international butter prices eased. Food processors, particularly confectionery manufacturers, sharply increased purchases of cheaper vegetable fats, including palm oil.
Butter supply falls despite lower import prices
Azerbaijan’s market for edible fats is changing rapidly as food manufacturers increase their use of vegetable alternatives while both butter imports and domestic production decline. The shift has occurred despite record global butter output and lower prices for imported dairy fats, indicating that processors’ cost strategies, rather than an external price shock, are driving the change.
According to Azerbaijan’s State Customs Committee data cited by br.az, imports of butter and other fats derived from milk fell by 9.3%, or 1,548 tonnes, in January–July 2026. Domestic butter production did not offset the decline: local output decreased by approximately 10% over the same period.
The contraction came as imported butter became cheaper. Its average customs value was $6.3 per kilogram in January–July, down 7.3% from the corresponding period of the previous year. Lower international prices therefore failed to prevent a reduction in Azerbaijan’s physical import volumes.
Palm oil purchases rise 19.5-fold
Imports of vegetable and animal fats and oils moved in the opposite direction. Purchases increased by 17.8%, equivalent to 15,769 tonnes, and the category’s total import volume was approximately seven times the volume of traditional butter imports. The broad group includes palm oil and its solid fractions, as well as other vegetable and animal fats.
The most pronounced change was recorded in palm oil. Azerbaijan imported 14,592.7 tonnes of palm oil and its fractions during the first half of 2026, according to figures reported by br.az. That was 19.5 times the quantity imported in the first six months of the previous year.
Economist Eyub Kerimli told the publication that the trend reflects a gradual move from more expensive dairy fats toward lower-cost vegetable alternatives. He said complete replacement of butter or the wider dairy range was not taking place. Instead, the main source of demand is the food-processing industry, particularly confectionery manufacturers seeking to reduce the cost of finished products by substituting vegetable inputs for milk fat.
Global surplus has limited local impact
The domestic shift contrasts with conditions in the international butter market. Reports from the US Department of Agriculture and international industry analysts put global production in 2025–2026 at a record 12 million to 12.3 million tonnes. Surplus supply in major markets, particularly the United States, New Zealand and the European Union, pushed prices lower. Demand has nevertheless increased for organic butter and specialty varieties containing herbs, garlic, honey or berries, while differences between supply and demand in the Northern and Southern hemispheres continue to reshape trade.
Production trends are not uniform across markets. Russia produced 162,900 tonnes of butter in January–June 2026, a decrease of 6.3% from the same period a year earlier. For Azerbaijani producers and importers, however, the central issue is the widening gap between dairy-fat use and demand for cheaper industrial substitutes. Falling butter prices may benefit importers, but the 19.5-fold increase in palm oil purchases shows that processors are changing formulations and procurement faster than favorable global dairy-market conditions can influence local demand.
