Butter price makes it an export star

Jersey dairy cows could come back into fashion to satisfy the growing demand for butter, Federated Farmers says.

At the latest Globaldairytrade auction prices rose ever so slightly by 0.2 per cent, setting an average price of US$3387, with butter showing the biggest gain at 3.4 per cent.

This follows two slight dips at the last two auctions after six consecutive rises.

The whole milk powder price rose 0.3 per cent to US$3114, while skim milk powder was down 3.2 per cent, and cheddar up 1.6 per cent.

Butter prices have more than doubled in the space of just a year, spurred on by a change of heart from scientists about the dangers posed by fats to health.

Federated Farmers dairy group chairman Chris Lewis said jersey cows produced more fat than the holstein-friesian or friesian cross, which had been more favoured in recent decades because of the high protein levels in its milk.

‘‘Dairy fats are now being seen as a healthy option, so we might see the jersey come back in fashion,’’ Lewis said.

Higher dairy fat prices could also trigger a cut in demand as people look to substitute vegetable oils.

Over the past six months dairy prices have largely tracked sideways, with most of the recovery occurring in the second half of last year. Any increase has been underpinned by a strong demand for fats.

‘‘Much of this surge can be put down to an acknowledgement by the scientific community that fats are no longer as bad for your health as once feared. In particular, this notion has been embraced in North America,’’ ASB analyst Nathan Penny said.

Fonterra had ‘‘a reasonable amount of flexibility’’ to make a switch to producing more butter as the dairy giant looked to optimise its product mix, he said.

‘‘Butter prices will be better in the next five to 10 years than they have been over the past decade.’’

While much of the demand was coming from the United States, New Zealand faced tariffs in that market, so demand from China was important.

A year ago the price for whole milk powder was about US$2000 per tonne, but this rose to US$3114 at Tuesday night’s auction. A total of 26,688 metric tonnes of product sold, and there were 160 participating bidders.