Southland bakery shops overseas as NZ butter price rockets

According to Stats NZ, butter prices have risen by more than 65% in the past year. Photo / 123rf

By Penny Miles of RNZ

Rocketing butter prices have forced a commercial bakery in the dairy heartland of Southland to scour the global market for cheaper alternatives.

Kaye’s Bakery in Invercargill sells Belgian biscuits, afghans and other sweet treats in supermarkets and dairies nationwide, often using butter from Australia to make its products.

Luella Penniall owns the family business, started by her parents, Lois and Evan, in the 1970s.

She orders 10 tonnes of butter at a time.

If the bakery is making large quantities of butter shortbread to order, that increases the requirements.

She said buying butter directly from New Zealand dairy companies was too expensive, despite Southland being one of the country’s biggest dairy-producing regions.

Kaye’s instead uses an Australian broker to buy all its butter wholesale, which Penniall described as “crazy”.

“I work with a company out of Australia,” she said.

“It seems crazy, but it’s too hard to buy off New Zealand butter companies. You need to be buying more than 10 tonnes to get a reasonable price.

“I’ll get supplied either Australian or New Zealand butter, but out of an Australian broker.”

Penniall preferred to support New Zealand farmers, but said she used Australian butter when it cost less.

“There’s no difference in New Zealand and Australian butter from a manufacturing perspective. The texture, the taste, the performance, it’s all good.”

In a quest to lower its ingredient costs, Kaye’s recently put butter from the United States on the table in a trial.

“We were offered butter out of America,” Penniall said.

“We checked the specs, and it was really a lot cheaper, like $3 a kilo.

“But it turned out the water content was actually a lot higher, which would have been a disaster for us in manufacturing.”

She would not use margarine because customers bought Kaye’s biscuits for their buttery quality.

The company was now grappling with price rises for all its key ingredients, and that cost would have to be passed on soon, she said.

“We do struggle with the cost of butter.

“Go back to 2022, only three years ago, we were paying around $11 per kilo, and now we’re paying $14, if not $15 a kilo.

“We do thousands and thousands of butter shortbreads for our brand and for other brands, and it makes it expensive because the customer wants the quality.”

She doesn’t see the cost of butter coming down soon.

“I think it’s the new way of that particular dairy product.”

At this week’s Global Dairy Trade Auction, the price of butter fell 1.5%, to US$7821/MT, after hitting a record high of US$7992/MT at the previous auction earlier this month.

The strength of world prices means dairy farmers are poised to receive record payouts of at least $10 a kilo of milksolids.

Stats NZ data shows butter prices have increased significantly over the past year, with prices up more than 65% in the 12 months to April.

- RNZ