Bitter butter battle brewing in NZ?

Did you do a double-take last time you were in the dairy aisle at the supermarket? You are not alone.

Butter prices in NZ supermarkets have risen sharply in the past year in tandem with global prices, which have moved upwards on very high European prices due to falling product and low inventories.

Further upside to global prices seems unlikely from here as market forces kick in and increased supply meets reduced demand, but a substantial fall is unlikely until Europe’s seasonal milk production lifts next year.

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"Did you do a double-take last time you were in the dairy aisle at the supermarket? You are not alone.” - Sharon Zollner

While high butter prices are not popular with shoppers, the Reserve Bank of New Zealand would probably be happy to take higher prices where it can find them, with CPI inflation by their own forecasts set to stay below its midpoint of 2 per cent until 2019 - even assuming no growth hiccups between now and then.

Sharon Zollner, Associate Director & Senior Economist, ANZ NZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.