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

Early Edition with Ryan Bridge

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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