New Zealanders Face Dairy Shock as Exports Prioritized for Fatter Profits.
New Zealand, a global powerhouse in dairy exports, is experiencing a significant domestic dairy price shock, with butter prices leading the surge. Latest figures released on Thursday revealed that local supplies are being curtailed as the industry increasingly prioritizes more lucrative international markets. This phenomenon has ripple effects, extending to other essential dairy products like cheese and milk, prompting economists to suggest grim alternatives for budget-conscious consumers in the country.
Official data from Stats New Zealand indicates a staggering 46.5% leap in butter prices for the year ending June, pushing the average cost of a 500-gram block to NZ5.09). The price surge isn’t limited to butter; milk prices also climbed by 14.3% over the same period, while cheese saw a sharp 30% increase. These exorbitant dairy prices have become a major talking point in New Zealand media, with reports suggesting that relief for consumers is unlikely anytime soon.
The intensity of consumer demand and limited domestic supply was starkly illustrated when wholesale and retail giant Costco implemented a temporary restriction in June, limiting butter sales to a maximum of 30 blocks per customer. Despite this measure, the store still sold out, as reported by the New Zealand Herald. Independent economist Brad Olsen, Chief Executive of Infometrics, confirmed that these elevated prices are significantly impacting New Zealand consumers, noting that for breakfast, “the cheap option… seems to be to try cereal without the milk.”
Olsen attributes this dynamic entirely to robust international prices and demand. He explained that butter supplies have struggled to keep pace with rising global demand over the past two years. Given that New Zealand exports the vast majority of its dairy products, companies are naturally incentivized to sell at higher international prices rather than offer cheaper rates domestically. This strategic decision by dairy exporters maximizes profits but leaves local consumers facing the brunt of global dairy economics.
Despite the pinch felt by New Zealand consumers, the economist highlighted a significant upside for the broader national economy. The substantial returns reaped by dairy farmers and the primary sector from higher overseas sales are injecting a considerable financial boost, with an estimated extra NZ2.7 billion) flowing into the economy from the higher dairy payout. Interestingly, despite the local price shock, New Zealand butter consumers are still paying 46% less than their American counterparts, providing a comparative perspective for the international dairy market.
Source: Yahoo Finance: Dairy giant New Zealand endures butter bust as profits take a hit
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