Butter prices could top record levels

Just when butter lovers thought there might be some relief from high prices, the squeeze is back on and the yellow gold is ahead of a year ago.

After a year of soaring prices butter finally softened with an almost 5 per cent drop in December, even if a $5-plus block was still the norm.

The respite appears to be shortlived, with ASB’s Rural team saying butter prices are already ahead of where they were this time last season with the seasonal lull in production still to come.

As a result, butter prices are expected to set fresh record highs over coming months.

Butter prices were found to have lifted 27 per cent so far this year, says the bank’s rural economist, Nathan Penny.

They are only 5 per cent below the record levels set in September.

‘‘Indeed, we anticipate butter prices will shatter last year’s records over coming months. This expectation is based on the fact that New Zealand is the world’s leading butter exporter, exporting more than 1.5 times the amount of butter of other leading dairy exporters [including the EU, the US, Australia and Argentina].’’

Butter prices peaked last year when New Zealand production and exports were at their weakest, over the winter and early spring. ‘‘All up, it still appears that the world faces an ongoing shortage of milk fat,’’ said Penny. ‘‘This milk fat price strength bodes well for our milk price forecasts.’’

The bank expects its 2017/18 milk price forecast of $6.55 a kilogram could yet rise from promising conditions which could flow through to a solid start for the new season. ASB’s 2018-19 milk price is at this stage set at $6.50/kg.

Butter prices had four successive monthly rises until December, with Statistics NZ tracking it at an average of $5.46 for the cheapest available 500g block.