This week,the price of butter broke through US$6000 per tonne at Wednesday's Global Dairy Trade auction - the highest since the trading platform was established in 2008.
In June the price of butter in New Zealand reached a record of $5.05 for 500g, according to the national food price index. The previous record a month earlier was $4.80, which was up from $3.38 in June last year. Today, the cheaper brands were about $5.30 per 500g on shop shelves.
Blomquists Bakery owner Sue Blomquist said she had also seen the prices go up but refused to substitute real butter with anything else.
The bakery had no other choice but to pass the higher prices on to the customer soon, she said.
"It has definitely affected us. We buy our butter in 25kg blocks now because it's cheaper, but still ..."
Despite Ms Blomquist's disappointment at the increased prices she acknowledged farmers had to make a living, and so did they.
Prices on the Global Dairy Trade platform were used to formulate Fonterra's farmgate milk price, which sits at $6.50 per kg of milksolids, up from $6.15 per kg last season.
At Wednesday's auction, butter hit US$6004 a tonne - up 3.4 per cent since the previous auction early this month and more than double the price paid this time last year. Fonterra, the world's biggest dairy exporter, now had the choice as to whether to produce more butter than its main product, whole milk powder.
AgriHQ chief analyst Susan Kilsby said strong consumer demand for natural, full-fat products such as butter was here to stay.
"This strong demand along with limited supply is keeping buyers of dairy commodities paying current high prices - though they aren't necessarily happy about paying so much for it," she said.
ASB rural economist Nathan Penny said butter prices were already high but likely to go higher.
"It looks like demand is very strong and suppliers are really struggling now," he said. "What we have seen here is a sea change in demand for milk fat."
- Additional reporting New Zealand Herald
