Butter prices rose 11 per cent in August, to a record high of $5.39 a block, according to Stats NZ. The annual butter price increase was the largest in percentage terms since 2010.
The average price of $5.39 for a cheapest-available 500g block was up 51 cents on July and up $2.07 (62 per cent) on August last year.
Overall food prices were up 2.3 per cent, the consumer price index showed.
Grocery food prices made the largest contribution to the annual change, up 2.8 per cent for the year. Butter had the largest contribution with a price increase of 62 per cent, followed by fresh milk, which increased 7.9 per cent.
"We have seen butter prices rising lately due to New Zealand's export driven market," consumers price index manager Matthew Haigh said. "Butter prices have experienced all-time highs in the global market, and this also drives the price here at home."
Globally, dairy fat prices are on the rise, which is broadly good news for the New Zealand economy.
Demand for milk fats continued to surge and in Europe, butter shortages had led to a price spike to US$7750 ($10,725) per metric tonne, well above current New Zealand prices.
Last week butter reached its second-highest level in the history of global dairy trade auctions, which set the price for New Zealand exporters.
The 2.3 per cent rise saw food prices continue to outpace the general rate of inflation.
Annual Consumer Price Index inflation is currently running at 1.7 per cent.
Overall food prices rose 3 per cent increase in the year to July.
The smaller increase in the August statistics, as compared with the year to July, was because of vegetable prices coming down from recent extremely high levels, Haigh said.
But vegetable prices had still increased 8.7 per cent in the latest year, led by kumara and potatoes and cucumber.
The price for a kilo of kumara was $8 in August , up from $3.23 in August last year.
"The exceptionally wet weather over the past year has had an impact on growing tuber vegetables such as potatoes and kumara," Haigh said. "The crop losses and extra manual work required for harvesting has translated into higher prices on supermarket shelves."
Fruit prices increased 0.3 per cent, with higher prices for avocados partly offset by lower prices for bananas.
Restaurant meals and ready-to-eat food prices increased 2.3 percent in the August 2017 year.
Meat, poultry, and fish increased 0.6 per cent in the August 2017 year, with higher prices for chicken (up 3.3 per cent) partly offset by lower prices for beef (down 2.6 per cent) and pork (down 8.6 per cent).
Non-alcoholic beverage prices decreased 1.4 per cent, with lower prices for energy drinks (down 4.8 per cent).