Yellow gold: Butter prices pinch local retailers

Bakers are feeling the pinch of record high butter prices.

Statistics New Zealand announced last week the price of the cheapest available 500g block of butter had risen to $5.39, 62 per cent and $2 more than in August last year.

"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."

So while the price of your weekly shop may have increased a couple of dollars, spare a thought for local bakeries, who use dozens of kilograms a week.

Sue Burge, co-owner of Ciabatta Bakery on White St, said so far the bakery hasn't increased prices despite costs increasing so much.

"We are feeling the pinch of it. You just absorb it to begin with," said Ms Burge.

"Even if you want to add that price on to the customer, it's challenging. But at the end of the day, we probably will have to, but we haven't yet."

Last week, butter reached the second highest price it has ever been at the global dairy trade auction, which set the price for New Zealand exporters. Butter shortages and growing demand in Europe has led to a spike in prices there.

Carey Baker, owner of Baked on Tryon St, said it was ridiculous Kiwis were expected to pay so much for something we produce a lot of domestically.

"It's bloody pathetic if you ask me."

Ms Baker uses between 20 and 40kg a week, and said the cost of butter for her had now doubled.

"I don't have a choice. I can't forward that cost on to the customer because I won't get the business.

"They could pass the cost on overseas but not locally."

Ms Burge said some bakeries would be using a cheaper substitute - emulsified fats - to reduce costs, but she would not use it.

"It's going to be a cheaper option, but then you sacrifice quality and that's something we take quite seriously."

Overall food prices were up 2.3 per cent in August. Fresh milk was up 7.9 per cent, and vegetables increased 8.7 per cent, led by kumara, potatoes and cucumber.