Commerce Commission milk decision correct

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2 August 2011

Commerce Commission milk decision correct

This morning’s release of a four-month analysis by the Commerce Commission into milk pricing should dispel any notion the New Zealand consumer is being exploited.

“Farmers were highly confident that the Commerce Commission would find out what we knew; the New Zealand consumer is not being ripped off when they buy milk,” says Willy Leferink, Federated Farmers Dairy chairperson.

“What led to calls for the Commerce Commission to look into milk pricing was milk selling in Australia and the United Kingdom at prices not seen for years.

“Some people didn’t seem to grasp that Australian supermarkets use milk as a loss leader to win market share. In February, Australian industry sources estimated Coles was underwriting its milk campaign to the tune of AU$300,000 to AU$400,000 a week.

“Two other things were overlooked as well; Australian milk doesn’t attract GST and the exchange rate. When you add these two things to official statistics from the March quarter, Kiwi milk retailed at NZ$3.68 for two litres, but in Australia, the average retail price for two litres of milk ranged from NZ$4.28 to NZ$5.84.

“This is why, in March, we welcomed the Commerce Commission’s preliminary analysis. Everyone had the opportunity to ‘put up’ what evidence they had so that the Commerce Commission could weigh the facts.

“Federated Farmers supplied our research into overseas retail prices and subsidies.

“When you look at ‘non-milk war’ retail pricing from the United States, Canada, Australia, UK, Ireland and France, New Zealand comes in at the lower end of pricing. Our milk doesn’t of course come with the hidden whammy of subsidy.

“I must add there has been another aspect hugely frustrating to many dairy farmers. That is the comparison between soft drinks and fresh milk.

“One is sugar infused cheap fizzy water containing food colouring, while milk is one of the most complete foods available. While milk is all about nutrition, soft drinks have virtually no nutritional value and frankly, seem to throw up some health concerns.

“Dairy farmers get up early and work really hard to ensure their cows are not just in good physical condition but have as low an environmental impact as possible. There’s a lot of effort that goes into every single glass of milk.

“Compare this to the highly mechanistic manufacture of soft drinks. Craftsmanship sums up what we do on-farm and the input of everyone involved in collecting, processing and delivering fresh milk to supermarkets and dairies.

“Milk is a fantastic food and as someone directly involved in its production, I know what’s involved. Everyone works hard to produce some of the best milk on earth and we are open and transparent about it,” Mr Leferink concluded.

MOST RECENT AUSTRALIAN MILK PRICES – RELEASED MAY 2011:

Australian Bureau of Statistics Average Retail Price - two litres whole milk (AU$)
(March 2011 quarter) NZ$ conversion AU$ bought NZ$1.343426667
(March 2011 quarter) NZ$ equivalent with NZ GST - Australian milk is GST free
Adelaide $2.77 $3.72 $4.28
Brisbane $2.81 $3.78 $4.34
Perth $2.83 $3.80 $4.37
Canberra $2.94 $3.95 $4.54
Sydney $3.11 $4.18 $4.80
Melbourne $3.11 $4.18 $4.80
Hobart $3.33 $4.47 $5.14
Darwin $3.78 $5.08 $5.84
Averages $3.09 $4.15 $4.76

By way of comparison, two litres of standard homogenised New Zealand milk was NZ$3.68 in March 2011 (Statistics NZ’s Food Price Index, March 2011).

Sources:
http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6403.0.55.001Mar%202011?OpenDocument

http://www.stats.govt.nz/browse_for_stats/economic_indicators/prices_indexes/food-price-index-info-releases.aspx

ENDS

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