Butter price will rise in spite of subsidy

Press, 2 March 1984, Page 2

Butter price will rise in spite of subsidy

PA Wellington Butter will rise in price but remain heavily subsidised by the dairy industry, the Dairy Board said yesterday. The board had applied to the Trade and Industry Department for a price increase for butter, said the board’s general manager, Mr Bernard Knowles. “The machinery is in motion to obtain a price rise, but the timing and extent of it we cannot reveal as yet," he said. The rise would be nothing

like the 30c a packet loss now being absorbed by the dairy industry because the board could not afford to lose sales to margarine, and because of the political unpopularity of such a big increase in a basic commodity so soon after the price freeze, Mr Knowles said.

An indication of how much butter might rise in price, however, could be seen in its relativity with margarine. Butter averages at $1.03 a 500 g pack while margarine (although not subject to price control)

averaged $l.lB a 500gpack. The board will not say when and by how much the butter price will rise, partly to avoid panic buying. The board has revised its calculation of the loss on local butter sales from $l2 million to between $lB million and $2O million, based on the fact that dairy farmers bre paid 340 c a kilogram of milkfat supplied to their dairy companies. This price is what could be earned on the world market, not in New Zealand.

The board calculates that the industry gets 30c per 500 g less than the cost of production and distribution of the butter. The board sells its butter ex-dairy factory at 95c a packet, and distributors then wholesale it at $1 a packet, giving it what the board claims is the lowest distribution margin in New Zealand.

If the full 30c subsidy were passed on, a retail price of $1.40 could seriously affect sales, according to the board.