Demand pushes butter prices to record high

Nathan Penny.
Nathan Penny.
Butter prices set a record high of $US5631 per metric tonne in this week's GlobalDairyTrade auction, reinforcing the increasing demand for milk fats.

Overall dairy prices lifted 0.6%, although key product whole milk powder fell 2.9% as expected. Anhydrous milk fat (AMF) prices also retreated from an auction record high, falling 1.2%.

A surge in global demand for milk fats could largely be attributed to an acknowledgement by the scientific community that fats were no longer as bad for health as once feared, ASB senior rural economist Nathan Penny said.

The trend back to fats, along with tighter global supply, had sent milk fat prices soaring, with both butter and AMF setting a number of auction record highs this year.

That trend was expected to continue and, while global dairy supply was likely to lift this season, global demand was likely to match that lift.

Analysis from Rabobank said Oceania dairy was now ''pricey'' compared to other regions, and the United States now had significantly cheaper butter than the EU and New Zealand.

The $US200 a tonne premium for New Zealand butter was sizeable and something that had not been seen for the past couple of years.

That would be something to watch going forward as the US stocks continued to mount, the note said.

Mr Penny said this week's whole milk powder fall could be attributed to better-than-expected New Zealand production.

Dairy markets had pushed WMP prices about 16% higher since March, as the possibility of disrupted New Zealand supply was factored in.

However, if anything, New Zealand production had held up, with April production 6.8% higher than April 2016.

Westpac economist Shyamal Maharaj said the demand outlook remained firm, especially across Asia.

Chinese domestic production was lifting, but the outlook for the Chinese economy was still positive and continued demand for premium milk products that New Zealand exported was expected to provide a floor under prices for now.

The ANZ commodity price index lifted in May, climbing 3.2% to be 26% higher than the same time last year.

The NZD index was now just 5% below the all-time peak registered in March, 2011, ANZ agri economist Con Williams said.

The stark difference this time was that while the previous spike was driven largely by dairy prices, recent gains were much broader across forestry, horticulture and meat.

Dairy prices increased 3.8% in May and were more than 50% above where they were this time last year.

Add a Comment


Our journalists are your neighbours

We are the South's eyes and ears in crucial council meetings, at court hearings, on the sidelines of sporting events and on the frontline of breaking news.

As our region faces uncharted waters in the wake of a global pandemic, Otago Daily Times continues to bring you local stories that matter.

We employ local journalists and photographers to tell your stories, as other outlets cut local coverage in favour of stories told out of Auckland, Wellington and Christchurch.

You can help us continue to bring you local news you can trust by becoming a supporter.

Become a Supporter