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Butter shortfall leaves French croissants half-baked

* Record prices, falling supply strain butter market

* France renowned for butter-rich products like croissants

* Shop shortages come as Macron seeks fairer food chain

* Market tensions easing but may linger till holiday season

PARIS, Oct 24 (Reuters) - France is running short of butter, with some supermarket shelves sitting empty and the price of croissants on the rise, creating a headache for the government just as it tries to make the food chain fairer for farmers.

The shortage is the result of falling milk production and rising butter demand globally, with consumer attitudes towards the spread, once shunned as unhealthy, turning more positive.

As a consequence France has been caught short. Soaring prices and reduced dairy supplies have put strain on producers and food businesses, with some halting deliveries and considering passing higher costs onto retailers and shoppers.

Makers of baked goods like croissants, in which butter makes up around a quarter of the content, have been grappling with a doubling of butter prices in the past year to record levels above 6 euros ($7.05) a kilo.

Speaking in his traditional bakery in Paris, Samir Kichou said he had not yet increased his prices because of extra butter costs but may have to soon.

"Because the year-end holidays are approaching, with Christmas preparations and particularly the 'Galette des Rois' cake which needs a lot of butter, if there is not a significant decline, we will be forced to pass on the price rise," he said.

European dairy processors and food industry groups have been warning of a squeeze, with Danish-based cooperative Arla Foods saying in August that the continent might face shortages by year-end.

Supermarkets in the capital and others parts of France have left gaps in their butter sections, with some stores displaying signs explaining a shortage for certain brands.

Dairy farmers complain that they get little benefit from soaring butter markets, arguing that what they are paid is more often tied to cheaper raw milk and milk powder prices.

"The problem is that on the French market the right signal was not given to dairy farmers, since prices were not adjusted in relation to the drop in dairy supply," said Dominique Charge, president of France's federation of dairy cooperatives.

The butter-supply tensions highlight the challenges faced by President Emmanuel Macron to honour an election pledge to change practices in the food chain so farmers get a better deal.

Agriculture Minister Stephane Travert played down the suggestion of acute shortages, but told parliament on Tuesday that retailers and suppliers should agree price adjustments in order to maintain deliveries.

The dairy market has shown signs of correcting, with butter prices easing and milk output expected to pick up in the second half of this year, but the effects of the crunch could linger until the peak holiday demand period at the end of the year.

(Reporting by Gus Trompiz, Michaela Cabrera, Anais Lebranchu and Dominique Vidalon; editing by Luke Baker and Richard Balmforth)