Butter jump no cause for panic
Butter lovers can relax. The spike in butter values at the latest GlobalDairyTrade auction is unlikely to see supermarkets and retailers rushing to lift their prices.
Butter was the biggest mover in the latest auction, lifting 8.8 per cent to $6724 (US$4897) a tonne last week. But this was still well below its highs of September last year when it surged to $8274 (US$6026), ASB rural economist Nathan Penny said.
He doubted it would result in lifts in butter’s retail price off the back of one result. ‘‘Prices have stabilised and have crept back up, but it’s still not that different from where they were. They have come back from those really high prices in the spring and they are still nearly 20 per cent lower than those highs ... even with the 8 per cent rise.’’ There would need to be similar lifts in subsequent auctions before retailers moved their prices up, Penny said.
All products at the auction rose with dairy prices up 4.9 per cent. Whole milk powder was up 5.1 per cent to $4133 (US$3010), anhydrous milk fat (AMF) jumped 2.2 per cent to $8990 (US$6547), skim milk powder (SMP) was up 6.5 per cent to $2496 (US$1818), cheddar jumped 5.2 per cent to $4786 (US$3486) and rennet casein was up 5.5 per cent to $6466 (US$4709). There were 129 winning bidders and 23,319 tonnes of product sold.
Penny said the result was close to expectations and was driven by dry December weather and production falls. The lift was the biggest shift in price movement since August last year with prices now averaging $4549 (US$3310) per tonne. Penny said 4.9 per cent was not a massive lift when compared with historic GDT data.
Federated Farmers Dairy chairman Chris Lewis said the market had likely taken a ‘‘wait and see’’ approach after the dairy industry had forecasted a cut in production in early December.
Even if there was decent rain it would not reverse the deficit that regions around the country had experienced, he said. ‘‘The market’s realising there could be a supply and demand dilemma with the supply maybe not coming out of New Zealand.’’
Some farmers were down in production by as much as 20 per cent and faced a big income drop. ‘‘At the start of the season if you had told farmers $6.50/kgMS, they would all be confidently telling you they would be making a profit, but with the production drop and buying supplements in, it’s about surviving at the moment.’’