Butter price refuses to melt

By James Ihaka

Despite months of plummeting dairy commodity prices, it will still cost you about $14 for a block of cheese and a pound of butter.

The Statistics New Zealand food price index for January showed the cost of food was up 0.8 per cent, with the high prices of some vegetables and fruit driving the increase.

There has been little change, however, for the cost of a 1kg block of mild cheddar cheese and 500g of butter, despite whole-milk powder prices in Fonterra's online auctions sliding more than 50 per cent since last July.

It now costs $10.51 for a 1kg block of mild cheddar cheese - a drop from $11.19 in September last year.

A 500g block of butter, which was $3.80 in September, now costs $3.63.

Fonterra brands managing director Philip McClure said prices for both had "softened" but he blamed rising costs of raw materials and global commodity prices for the dairy staples maintaining their high prices.

He said Fonterra also did not pass all of the costs on to its customers.

"We absorbed cost increases ... so it would be wrong to expect a massive correction in the market as we never passed on the peak prices."

Mr McClure said Fonterra had cheese and butter inventory that was bought between six and nine months ago when its commodity price was more than double historical averages.

"So it will take some time for this product to flow through the market."

Foodstuffs general manager retail Murray Jordan said there was evidence prices had gone down and they could go lower still. But he said retailers were waiting on a reduction in cost price from their suppliers.

"I can assure you we will be passing these reductions on to our consumers when we get them," he said.

Consumer NZ spokeswoman Belinda Allan said it was "disappointing" prices for cheese and butter were at similar levels to December 2007.

She said a drop in petrol prices since last year's highs had not been mirrored in a drop in food prices.

"Taking into account that international milk powder prices have nearly halved we're disappointed that these cuts haven't translated into cheaper prices at the checkout," she said.

Meanwhile, children may be thankful the cost of broccoli surged 45 per cent but their parents may not be happy the cost of making salads increased, with tomatoes and kiwifruit up almost 50 per cent in January.

The cost of the perennial favourites - the meat pie or a serving of fish and chips - remained virtually the same.

Sober drivers paid 2.7 per cent more for their non-alcoholic beverages and restaurant diners coughed up 0.4 per cent more to eat out.

Partially offsetting the rise was a drop in the cost of cabbage, down 24.4 per cent, and apples, which fell 11.4 per cent.


BIGGEST MOVERS

Statistics New Zealand Food Price Index from December to January 2009:

UP
* 1kg tomatoes: 49.6 per cent
* 1kg kiwifruit: 48 per cent
* 1kg broccoli: 45 per cent
* Soft drinks: 7.1 per cent

DOWN
* 1kg cabbage: 24.4 per cent
* 1kg apples: 11.4 per cent
* 1kg carrots: 11.1 per cent
* 1kg lamb chops: 9.5 per cent
* 250g chocolate: 7.3 per cent

LITTLE OR NO CHANGE
* 1kg block of mild cheddar cheese: $10.51 (no change)
* 500g of salted butter: $3.65 to $3.63
* Two litres of homogenised milk: $3.33 to $3.31
* One fish and chips: $5.19 to $5.24
* Meat pie: $3.15 (no change)

- NZ Herald

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