Good for economy hard for consumers

The increase in the global price of milk which has been welcomed by dairy farmers isn’t so welcome to consumers who are showing resistance to domestic price rises for dairy products.

The price of milk has become too rich for many households’ taste with dairy giant Fonterra reporting a “dramatic” fall in sales.

The price of a two litre bottle of milk has jumped 15c to $4.30-$4.50 after two price rises in the past five months, the result of strong global dairy commodity prices.

Fonterra Brands managing director Peter McClure, an industry veteran, says it is the highest milk price he can remember, and has led to a fall of about 1 per cent in milk sales in the past three months.

This is more significant than it sounds given milk sales have been growing solidly at 2-3 per cent for five years, boosted by Kiwis’ love affair with coffee, he says.

McClure has seen shoppers shy away from buying milk during previous price spikes but says sales have recovered quickly in the past. This time the decline is continuing.

How long will it be before someone suggests subsidising domestic prices and/or asks farmers to take less for milk supplied for domestic consumption?

Funny how no-one wants to subsidise the farmers when the price falls – and I hasten to add I’m among them.

Increased prices for producers are very good for the economy in the medium to long term. Although that will be cold comfort to people struggling to afford dairy produce in the short term.

3 Responses to Good for economy hard for consumers

  1. robertguyton says:

    Which all means that some people are getting their milk for free!

    http://robertguyton.blogspot.com/2011/01/milking-it.html

    Like

  2. Paul Walker says:

    What seems to have been discovered is that the demand curve for milk slopes downwards. I would be a lot more worried if it didn’t.

    Like

  3. homepaddock says:

    Paul, good point. It would be most unusual if a price rise led to an increase in demand.

    Like

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