Fonterra chief executive Miles Hurrell said the cooperative cannot and will not set different butter prices for domestic and international customers.
Stats NZ reports that the price of a 500-gram block of butter surged by 46.5% over the year ending in May.
Hurrell spoke to the media in Christchurch, following a meeting with Finance Minister Nicola Willis earlier in the week, during which they addressed the issue of butter prices, among other topics.
While acknowledging the financial strain faced by households, Hurrell explained that the rising prices are a result of supply failing to match demand. He noted that worldwide demand for both dairy fat and dairy protein is on the rise, driven largely by strong consumption in China and other countries.
Hurrell also emphasised that Fonterra has no social obligation to provide less expensive products to domestic consumers.
“We know we have an obligation to sell here in New Zealand, and we do that, and we support the New Zealand economy,” he said.
“But our job is to not come in with a two-tier pricing system … and discount here in the New Zealand market, when we have an international obligation to operate as well.”
For Hurrell, the increase in dairy prices was actually positive for the New Zealand economy, calling it a “good news story.”
“It talks to the economic recovery that I know the New Zealand Government has been talking about.”
Hurrell clarified that the ultimate prices consumers see in stores are determined by retailers, who independently establish their own costs and profit margins. He said he discussed these factors in detail with Finance Minister Nicola Willis during their Tuesday meeting.