Aussie household staple being snapped up by Kiwis as local price jumps by 65 per cent

Yahoo

22-05-2025

A 'perfect storm' has led to butter prices increasing by more than 65 per cent over the last year in New Zealand, forcing one popular bakery to buy it from Australia instead.
Kaye's Bakery owner Luella Penniall told Yahoo News she always tries to buy local butter, but lately the price has been too high. Her broker often advises her to import her massive multi-tonne order of butter from Australia, where she can make greater savings.
'It's craziness. There could be $1.50 a kilo difference, and when you're buying $50,000 or $100,000 worth at a time, that adds up to a lot,' she said.
Contracts with retailers who sell her produce prevent her from suddenly altering her price, so continuing to always use local butter as the cost soars would come at a massive financial cost. Besides, increasing the price of her famous cakes, slices and biscuits would harm Kiwi shoppers who are already struggling with the cost of living.
'I'm a New Zealand manufacturer and I don't want my products to become unaffordable,' she said.
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Kiwi shoppers are also feeling the pinch at the country's three major supermarkets, Woolworths, PAKnSAVE and New World.
At Woolworths, New Zealand-made 400-gram packs of Westgold sell for NZ$9.95 (A$9.16) locally, but the price drops to just $6.50 in Australian stores. While 250-gram packs of New Zealand's famous Mainland butter are selling for $8.90 ($8.15) in New Zealand versus $6.50 in Australian stores.
According to an international supply chain expert, a major reason Kiwis are charged high prices for their own butter is that it's in high demand overseas, where it can be bought at a "good price" in greater amounts.
'New Zealand butter is a premium product, and it's really well recognised around the world,' Australian National University business and economics lecturer David Leaney explained.
The New Zealand dollar is struggling due to concerns about a recession, China's slumping economy, and the threat of tariffs from US President Donald Trump. This makes it more affordable right now for overseas buyers to use their strong currencies to snap up Kiwi butter.
Demand is also being driven by problems in the northern hemisphere with extreme weather and crop failure leading to shortages. This reduced competition is also leading to the New Zealand product attracting a premium.
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Why farmers are also paying more to make butter
Looking domestically, New Zealand farmers are facing ongoing pressures as drought continues to increase the cost of raising animals. Buying and transporting extra feed comes with an added cost. And when cattle consume supplementary feed rather than paddock grass the fat concentration of the milk is altered, further impacting the sale price.
'It's unusual for all of the international factors to line up all in the same direction. And it's even more unusual for all the domestic ones to do the same. It's a perfect storm at the moment,' Leaney said.
Travelling around New Zealand, it's often astonishing to see how little local fresh fruit and vegetables are available in supermarkets. When orchards and backyard trees are sprouting lemons, oranges and apples, retail shelves are lined with American-grown fruit.
This is driven by producers being locked into big international contracts, which buy a greater volume of food than local retailers need.
'Even if they wanted to sell locally at a higher price, they've already been lured in by big contracts,' he said.
'The same thing happens with Australia's natural gas. We signed some really big contracts to supply gas at a huge volume to overseas markets, with prices locked in. And even though we could sell it for more domestically, we can't, because we're locked into those contracts.
'You end up with gas going overseas, and then being imported back here at a higher price.'
Leaney thinks increasing butter prices will be temporary, and the price will stabilise due to market forces.
He compares the situation to eggs in Australia, where avian influenza outbreaks led to shortages and increased prices. While prices no longer seem to be increasing, they're unlikely to drop again unless economic drivers change.
'The problem is hard to fix. It self-adjusts because sometimes not all of the factors will keep aligning. Exchange rates could change, or the gap in the market will be filled by someone else. Once you become the most expensive option, then suddenly people will start looking for the second or third,' Leaney said.
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