Although New Zealand’s milk supply for the first eight months of the 2020/21 season (July’20 – Jan ’21) was 0.8% higher year-on-year (y-o-y), butter production in the country is forecast to decline to 520,000 tonnes in the 2021 calendar year, down 1% y-o-y. Thus, indicating that most of the milk has being channelled into the production of cheese and whole milk powder.
China remains the key demand driver for New Zealand butter. Chinese consumers are continuously looking to improve and diversify the application of butter in baking, cooking and preparation of desserts. With the Mintec price for fresh milk from China close to a record high, an appreciating yuan and increased butter consumption underpin strong butter imports.
With the current milk season coming to an end in April 2021, New Zealand butter production has started declining. It is likely to support butter prices in the second quarter of 2021, with further support expected from the increasing demand from China.
Westland Milk products, New Zealand’s second-largest cooperative, is investing NZD 40 million (US$27.8 million) to double its commercial butter output. The construction is expected to start in May 2021 and last for three months. The upgrade would increase consumer butter production to 42,000 tonnes a year, which equates to 8% of the total butter production in New Zealand in 2020. This projected additional supply of butter into the New Zealand market is likely to stabilise New Zealand butter prices towards the end of 2021. The Mintec price for New Zealand butter stands at NZD 8,170/MT, up 38.2% quarter-on-quarter.