WELLINGTON: A butter renaissance is relieving a little of the pain farmers are feeling from low milk prices in a world awash with milk powder.
Celebrity chef shows, the trend to eating natural products, and butter shortages, especially in Japan, meant New Zealand butter was in demand, said Fonterra managing director global ingredients Kelvin Wickham. “Margarine has got caught up in the trans-fatty acid debate so been tagged into the bad fat basket,” he said.
Japan, a country which likes its bread and cake, has experienced butter shortages for several years, the last two so severe that sales have been limited to one pack per customer and the protectionist government has been forced to call for imported product.
Total New Zealand butter exports to Japan last year jumped 139 per cent to 7213 tonnes on the previous year, and by the end of the third quarter of this year had risen to 10,534 tonnes. Wickham said the full year is likely to record a 95 per cent increase in New Zealand butter exports to Japan of 14,046 tonnes.
Japan’s butter shortage is attributed to aging farmers and processors prioritising milk for fresh milk and cream, with butter production last on their list. The Japanese government in May called for tenders for 10,000 tonnes of imported butter by October, in which Fonterra participated.
Japan’s annual butter consumption is 70,000 to 80,000 tonnes. It typically imposes a 35 per cent tariff on butter imports to protect its dairy farmers. Observers believe a Trans Pacific Partnership agreement, of which Japan is a part, is unlikely to ease the butter problem with the government wary of upsetting farmers by significantly relaxing import restrictions.
Europe is also answering the world’s call for more butter, particularly from the US, said Wickham. Europe’s total butter exports to all markets for the year to August were up 9 per cent at 88,578 tonnes.
The American Butter Institute this year said butter consumption was at its highest in 40 years at 2.6kg per person. The US had bought 10,362 tonnes of European butter in the year to end August, 102 per cent more than last year, said Wickham. The price of butter within the US was well above the world price because of the domestic shortage, he said.
The US market was “pretty much closed” to New Zealand milk fats, but Fonterra had been able to use the shortage to export extra milk fat in blended products, and had also taken the opportunity of America’s minimal butter exports this year to fill Middle East market gaps, he said.
New Zealand butter continued to sell strongly in Iran, Turkey, Saudi Arabia and Egypt. “Butter’s in good demand, it’s not the issue that used to dog us.”
Russia, traditionally a big market for New Zealand butter, blocked Fonterra products after the company’s false botulism scare, but Russian authorities had begun clearing Fonterra plants and limited access was now available.
The average price for butter on the latest Global Dairy Trade auction rose 5.7 per cent on the previous event to US$3009 tonne. In March it reached a high of nearly US$4000 tonne. The low for the year was US$2600 in late October. In comparison, the average price of wholemilk powder, New Zealand’s export staple, has languished on GDT for most of the year well under US$3000 tonne.