That’s been driven by a rise in wholesale prices at Global Dairy Trade auctions, which have doubled in the past five years and tripled in the past decade.
High Ground Dairy consultant Stu Davison, who provides regular analysis of global prices on Gold Sport’s Country Sport Breakfast, said the biggest factor was long-term growth in demand from China and Southeast Asia.
“Diets have been developing in Asia. The premise of including butter in a more Western diet in these Asian nations has been a big driver, especially New Zealand butter as they value the taste and they see the difference in the colour.”
Davison said Europe had also been producing consistently less butter since the start of last year, prompting many European countries to stockpile more and export less.
“You get to the situation we’re in now where butter is at extraordinary heights and everyone wants their butter on toast. We don’t see it running right back to where we were five years ago.”
Infometrics principal economist Brad Olsen, who produces an annual index of Foodstuffs’ supply costs, said New Zealand was impacted by those global factors because it exports so much of its product overseas.
“It’s a bit of a double-edged sword. Although clearly households are paying more at supermarkets, those higher prices internationally are also bringing forward better gains and returns for farmers domestically.”
Fonterra chief financial officer Andrew Murray told The Country wholesale prices weren’t expected to fall any time soon.
“If you look at [New Zealand butter], it’s still a lot less than you’re paying in Europe, so I think that will put a floor on butter prices for a while.”
Michael Sergel is a senior reporter, usually based in Auckland. He has been covering business, politics, local government and consumer affairs for more than a decade.
