Fast Facts

Higher export price for butter hits local retail price

The export price of butter reached a new high in the September 2017 quarter, to be up 8.8 percent from the June 2017 quarter, Stats NZ said.

Export butter prices increased 75 percent in the year ended September 2017, and these gains were closely tracked in domestic butter prices in New Zealand shops.

Whole milk powder prices were down 2.0 percent and cheese fell 1.7 percent in the September 2017 quarter. Dairy product export prices as a whole increased 38 percent in the September 2017 year, despite dipping 0.9 percent in the September 2017 quarter.

The recent increase in butter export prices was influenced by high global demand and a drop in European milk supply.

“Lower international supply was caused partly by lower farm-gate milk prices in Europe, which led to reduced herd sizes. At the same time we’ve seen a consumer swing towards butter and away from products like margarine,” prices senior manager Jason Attewell said.

“Globally, consumers often place a premium on New Zealand butter. That demand has pushed the export price to new heights.

International market prices for butter typically flow through to the supermarket cost for New Zealand consumers.

In the September 2017 quarter, the price of a 500g block of butter (as measured by the consumers price index) was up 9.7 percent from the June 2017 quarter.

“Kiwi food shoppers have felt the impact of record world butter prices. The average price of the cheapest available block of butter in supermarkets reached a record $5.55 in September 2017, up 60 percent from September 2016,” Mr Attewell said. “Prices have continued to climb into November 2017, hitting $5.74 a block.”

“In recent years, export and domestic price changes for butter have tracked very closely, which reflects the fact that New Zealand consumers are ‘price takers’ on the international market despite New Zealand being a major butter producer.”

Other indicators, such as the fortnightly Global Dairy Trade (GDT) auction price for butter, also increased during the September 2017 quarter– the auction price reached a five-year high of US$6,026 a metric tonne on 19 September 2017.

However, since September 2017 GDT prices have fallen. The auction price on 5 December 2017 was down 24 percent to US$4,575 a metric tonne. Typically, there has been a lag of 4–6 months between GDT price movements and the prices New Zealand consumers see on supermarket shelves.

Local and international production have both increased and milk supply in Europe has begun to expand.

“Fears of the butter shortage, or #BeurreGate, continuing through to Christmas have abated,” Mr Attewell said.

“However, with the dry start to our summer it’s unclear how the price of butter will change in the near future.”

Source: Stats NZ

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