Price of milk not the problem

Milk’s more expensive than petrol.

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%.

7 Responses to Price of milk not the problem

  1. JC says:

    “We should note the wisdom of the large middle east oil producing states which ensure cheap petrol for their own people” Mr Farrelly says.”

    Yes, well.. does that mean he’s recommending an income or benefit of around $6000 per year?


  2. gravedodger says:

    I presume that Mr Farrelly is advocating a taxpayer subsidy for retail milk.
    Therefore the major component of the $4.00 latte will also be subsidised, that will give a nice boost to that part of the retail sector.
    Then an enterprising farmer could purchase the subsidised milk and boost his daily production with a bit of recycling.
    Making milk cheaper will have very minimal effect on consumption as a 1.5 liter of coke, pepsi,7up etc will still be the preferred option for those who should make changes to their diet.

    That same muppett CEO of the PHO also went to a place of learning and enjoyed a heavily subsidised course of learning resulting in a nicely printed piece of paper with the nice entry on his CV.
    The qualifications gained obviously had zilch content about economics,trade or marketing but an idiot media repeat his inane pronouncement as “the truth”. The almost complete idiot should keep to his knitting but I suspect he may be just as ordinary in that sphere.

    One of the continuing annoyances for me in milk marketing is the even higher price I pay for skim milk with added Calcium when the bastards keep the cream and sell that for additional profit. A house cow would be nice at times but full cream milk would probably not be a good idea nowadays.

  3. Bryan says:

    A few selected facts, spun to make a story. For starters, $AU2.00 = $NZ2.60. Woolworths own brand 2l sells at this price in Aus ($3.60 in NZ), but all other 2l milk on their web shop is more than $AU3.50 ($NZ4.55).

  4. Chris says:

    I have no problem with farmers looking to gain the most from there produce but why is it whenever there’s a flood or drought farmers expect the government to do the right thing and help them? We help the farmers when things get very bad and yet when the country asks for the same consideration its ‘against market principles’.

    Lastly i would ask how you ‘budget well’ when the tax changes made most low/middle income families poorer and butter’s price skyrockets? I personally already eat much less dairy than in the past but theres only so much fat to trim.

  5. homepaddock says:

    Chris these days assitance for dourghts and floods isn’t hand outs, it’s things like parking income from the sale of capital stock for tax purposes until you restock.

  6. gravedodger says:

    I can not understand why “drought relief” measures need to be promulgated. The very nature of farming with the complications of weather international markets and the like demand a more flexible approach to the taxation accounting regime than most other businesses.
    For most of my farming life I smoothed income by manipulating wool grain and stock numbers at balance date to avoid excessive taxation due to early/late sale and price fluctuations and with income adjustments between my wife and self with outside income considerations.
    All income was taxed and there was no avoidance just sensible accounting practice, admittedly easier than say pure dairy income which was documented as to specific delivery dates but who the hell cared how much wool, seed, grain etc was on hand at balance date or what it was actually worth.
    “drought relief”will always be seen by those who have no knowledge of the problems forced destocking and early sale of produce can have on tax liability, admittedly able to be regained in subsequent years but with no interest on overpaid tax and high penalties for under estimated liability the system demands “drought relief “status to bring sensible outcomes.

  7. farmerbraun says:

    “but full cream milk would probably not be a good idea nowadays.”

    Nope . Full cream milk , which contains 4% fat , is 96% fat free.
    That small amount of fat contains the fat soluble vitamins A and D .
    Without the A and D , calcium is poorly absorbed.
    And fats are essential in appetite regulation ; they stop you from bingeing on sugars , which are killers.
    That low fat milk is rubbish GD.

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