$12 for a block of butter? What is driving the price spike?

Prices for 500g blocks of butter have spiked above $10 and could become more expensive in the coming months. Photo / NZME

• Prices for 500g blocks of butter have risen by as much as $3 since January.
• Westpac economist says we could see retail prices rise in coming months.
• Anchor and Mainland 500g blocks of butter have spiked above $10.

Buttering your favourite slice of bread or scones got a little more expensive after prices for 500g blocks of butter spiked above $10 recently.

And one economist warns retail prices for butter could increase in coming months.

New World was selling a block of Anchor 500g butter today for $12.49. That same block cost $9.19 on January 9.

New World’s Pams 500g block is currently selling for $8.79. In January, the company’s Victoria Park store sold the same block for $6.49.

The same Pams butter will cost $7.99 at Pak’nSave (which is operated by Foodstuffs, along with New World). In January, it was selling for $6.29.

Woolworths is selling a 500g block of Anchor butter for $9.90, or $11 for non-members. The same block retailed for $9.19 in January.

Woolworths also had a 500g block of Mainland butter for sale at $10.90.

At The Warehouse, a 500g block of Market Kitchen salted butter costs $8.19, and there is a limit of two per customer.

Costco was selling Mainland 500g of unsalted butter for $8.71 for members.

A Woolworths New Zealand spokesperson said: “We know it’s a tough time for Kiwi households and we’re working hard to keep butter prices as low as possible, for as long as possible.

“Market conditions have changed significantly in the last few months, and international butter prices are now at record highs. While this is great news for our farmers, it does mean we have to pass on these increased prices to our customers, which is why we’ve changed the shelf price for butter products.”

A spokesperson for Foodstuffs said butter pricing was driven by market conditions.

Westpac economist Paul Clark said retail prices for butter generally moved in line with export prices.

“Given that, it is reasonable to suggest that, with Global Dairy Trade auction prices for butter having reached new highs, combined with a generally weaker New Zealand dollar … should see retail prices ratchet higher in coming months.

“It is also important to note that retail price adjustments do tend to lag as inventories decline.”

At the latest Global Dairy Trade auction last month, the price of butter rose 1.5% to an average of US$7679/MT (metric tonne). That compares to an average price of US$6815 on January 7.

Butter has been in short supply in some parts of the world, while demand has lifted.

A Consumer NZ investigation into butter prices last year found that, depending on where you live, you could be paying 86% more for butter than the cheapest price on offer.

Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics such as retail, small business, the workplace and macroeconomics.