Given we export most of the former and import most of the latter that ought to be cause for celebration but not everyone sees it that way:
Manaia Health PHO Chief Executive Chris Farrelly has slammed the high cost of milk saying it is a national outrage that a country that produces 15 billion litres annually cannot supply cheap milk to the domestic market . .
The price of milk in a Whangarei supermarket for a two litre bottle of milk was up to $4.79 and the cheapest was $3.65. Families in Australia are paying A$2. Recently the price of milk in Australia was slashed by 33%, while the price of milk continues to rise. . .
Australia doesn’t export as high a proportion of its milk as we do and the price is low because of strong competition between supermarkets.
“Low income families simply cannot afford to drink milk,” says Mr Farrelly. “It’s no wonder we are seeing increasing childhood obesity and diabetes if families are swapping milk for fizzy.
“The argument that milk sold in New Zealand must match international prices is a nonsense particularly when only 5% of our milk production is for the domestic market. We should note the wisdom of the large middle east oil producing states which ensure cheap petrol for their own people” Mr Farrelly says.
The argument domestic prices must match international ones isn’t nonsense. Farmers go for the best price and if the export price was better than the domestic one then they’d give up town supply.
One way to bring the domestic price down is subsidies which would be very expensive and not necessarily help the people who need it most.
The other is to restrict exports which would sabotage the economic recovery and might not make any difference to domestic prices. When Argentina did that farmers swapped from dairying to soya which was more profitable, supply dropped and the country had to start importing milk which was more expensive.
The problem isn’t that the price is too high, it’s either that incomes are too low or people don’t budget well.
Increasing incomes requires sustainable growth in the tradable sector. That won’t be achieved by subsidies but is helped by better prices for milk and there was more good news on that front in this morning’s globalDairyTrade auction.
The trade weighted index went up 3.9%.
The recipe for anhydrous milk fat dropped 2.4%; skim milk powder went up .7%; and the whole milk powder price increased 7.9%.