Ryan Bridge: Why expensive butter prices are actually a good thing

The price of butter's shot up 65% over the past year - you might have noticed nana's cookie jar's a bit empty lately. 

Bakers are buying in bulk from the Aussies, where it's cheaper.

Online discussion blames our dairy farmers, the co-op that buys their milk, and the producers who sell it. 

But, there are a couple of reason its cheaper there than here. 

1) We export a hell of a lot more to the world than the Aussies do. 

In 2023, they exported 9.4 tonnes. We exported 441 tonnes. They exported 2% of the quantity we did. 

That means our price is more susceptible to the international market price. We export most of our butter, we pay the international price. 

Australia on the other hand, eats a lot more of its own and exports less. 

This is good and bad. It mean we pay the trade price, yes, but it also means when the price is high, as it has been lately, our largest company Fonterra does well. Our farmers do well. They spend money here and drive growth in our economy which we all benefit from. 

Yesterday we learned that means an extra $15-billion being ploughed into this economy. 

2) Supply issues in Europe have pushed that global price up. Our is a premium product which is in high demand overseas. It's grass fed, more sustainable, and just tastes better. The exchange rate has also encouraged large purchases from offshore buyers. 

3) When you produce a lot of something, producers will lock themselves into big international contacts because they buy greater volumes than local retailers need. 

The Aussies have this problem with their gas. Australian National University business and economics lecturer David Leaney explains that they signed some big money contracts to supply a enormous amount of gas at locked-in prices. He says even though they could sell it for more domestically, they're locked into those contracts. 

4) We don't know the details of the Costco cheap butter that everyone's been raving about. Is it a loss leader? Is it a marketing ploy? Discount it to get people into your store to then simultaneously buy 48 rolls of toilet paper?

So yes, Kiwi butter is expensive at home. But the fact it's expensive elsewhere is actually a good thing for our country as a whole. 

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Episode Transcript

Speaker 1 (00:00):
So butter is bloody expensive. Bakers are buying in bulk
from the Assies because it's cheaper. The Internet blames our
dairy farmers, the co op that buys their milk, the
producers who sell it. But there are a couple of
things to point out here. One, we export a hell
of a lot more butter to the world than the
Aussies do. In twenty twenty three, we exported nine point

(00:21):
four tons. Sorry, they exported nine point four tons. Guess
what we did four hundred and forty one tons. So
they exported two percent of the quantity that we did,
and that means our price is more susceptible to the
international market price. We export most of our butter, we
pay the international price. Australia, on the other hand, eats

(00:43):
a lot more of its own butter exports less. This
is good and bad. It means we pay the trade price, yes,
but it also means that when the price is high,
as it has been lately. Our largest company in Fonterra
does well. Our farmers do well. They spend more money here,
they drive growth in are. Yesterday we learned that was
to the tune for the season of fifteen billion dollars

(01:05):
being plowed in. Two. Supply issues in Europe have pushed
the price the global price. Up Ours is a premium product.
It's grass feed, it's sustainable, which is in high demand overseas,
and it tastes better. We all know that the exchange
rate has also encouraged the large purchases from offshore buyers. Three.

(01:25):
When you produce a lot of something, producers will lock
themselves into big international contracts because they buy greater volumes
than your local retailers would need. The Aussies have this
problem with their gas. Australian National University Business economics lecturer
David Lehi explains this well. He says, they signed some
big money contracts over there to supply enormous amounts of

(01:48):
gas at locked in prices, and you pay more in
Assie for your Assie gas than you would and somewhere
else in the world. He says, even though they could
sell it for more domestic, they're locked into these contracts.
You can't Number four. We don't actually know the details
of that costco butter that's been doing the rounds on
the internet lately, do we. Everyone's been raving about it.

(02:11):
Is it a lost leader, Is it a marketing POI
is it discounted to get people into the store and
then simultaneously by forty eight rolls of toilet paper. So yes,
Kiwi butter is bloody expensive at home, but the fact
it's expensive elsewhere is actually a good thing on the
whole for New Zealand. For more from Early Edition with

(02:33):
Ryan Bridge, listen live to news Talk set Be from
five am weekdays, or follow the podcast on iHeartRadio.