Look at retailers not producers

Federated Farmers and Fonterra are both pleased that the Commerce Commission has decided it has no basis for a price control inquiry into milk.

However, it’s not ruling out a further inquiry  into how Fonterra sets the price it pays farmers and what it charges other processors.

Sue Chetwin from Consumer is calling for a milk commissioner and  Labour and Green MPs want the Commerce select committee to launch another inquiry.

If they’re doing that, should look at the whole supply chain.

The Commerce Commission report said there was enough retail competition between  two major supermarket chains, dairies, service stations and other retailers.

I’m not so sure about that. Almost everything is more expensive at dairies, service stations and other small retailers. Those are the places you go for emergency supplies, not normal grocery shopping.

That leaves the supermarket duopoly.

It is difficult comparing prices here with those overseas because of the exchange rate and different taxes, but our observation at restaurants and supermarket during our recent trip to the USA and Canada was that food there seemed to be cheaper than it is here.

Some prices in a Walmart in Canada were: beef mince $9.50/kg; T bone $16.22; sirloin $11.10; stir fry $15.06; roast beef $12.06; bacon $10.44; pork tenderloin $10.96; pork chops $8.80.

I don’t have local comparison for these, but a  New Zealand boneless leg  lamb was selling for $14.92/kg  at Walmart, I saw it priced at $29.99/kg at a New World  here yesterday.

A frozen leg of New Zealand lamb was $13.62/kg.

It looked good but beside it were Walmart’s own brand of frozen loin chops selling for $20/kg. The bag was full of ice and had they been a tenth the price we might have contemplated buying them for dog meat.

Eggs were $2.98/dozen; skim milk cost $1.38/litre, full cream milk was $2.77/litre..

Cheddar cheese cost $13.43/kg which, taking the exchange rate into account, wouldn’t be much different form here.

The only thing that was far more expensive – and to our admittedly biased taste buds, not nearly as nice – was ice cream. A small cone cost $5.

Prices recorded at one supermarket and the gut reaction from purchases at other supermarkets and restaurants aren’t much to build a case on.

But our overwhelming impression was that food was cheaper and we wondered how much that had to do with greater competition between supermarkets there in contrast to the duopoly which operates here.

If there’s to be an investigation into food prices it needs to be a thorough one which includes retailers not just producers and processors.

13 Responses to Look at retailers not producers

  1. Jeff Grigor says:

    In Timaru the cheapest place by far to buy milk is at dairies.
    A number of them are selling it at cost as a lost leader and have been doing so for some time.


  2. To be honest, I treat milk as one of those things I will continue to buy no matter what the cost. I “need” it in my coffee and in my muesli. I will contemplate buying milk powder for baking (but would go back if it was gross). Cheese falls into the same category. My kids inhale the stuff. But then again, I’m not counting the pennies at the end of every shop. I feel for those who are.


  3. Redbaiter says:

    “Sue Chetwin from Consumer is calling for a milk commissioner and Labour and Green MPs want the Commerce select committee to launch another inquiry.”

    Same old same old- this is what comes of not teaching people history. These stupid communists probably have no idea of why the Soviet Union collapsed. Maybe they don’t even know it existed.


  4. robertguyton says:

    I don’t buy milk at all. It’s easy to find alternatives to muesli for breakfast and coffee that has milk in it is an abomination 🙂
    ‘Redbaiter’ – what a funny name! For someone who knows a lot of whitebaiters that is.


  5. Cadwallader says:

    I wager Redbaiter that the Milk Commissioner would love to have a uniform and the entitlement (state mandated) to hand out penalties, initially to the suppliers then to their confederates, the consumers! This is a dreadful idea from a pointless person.
    I think a KFC commissioner could be created, a Commissioner to monitor consumption of ice cream, sweets, liquor in fact why not a Commissioner to ensure there is no fun or enjoyment of life itself?


  6. Adolf Fiinkensein says:

    Last week I did an online comparison over a range of items, looking at prices in Coles here in Gawler and comparing those with Countdown on Auckland’s North Shore.

    The difference was staggering. What cost $10.00 in Auckland could be bought for $6.00 in South Australia. (I left out bananas for obvious reasons.)

    Sure there’s GST on all food items but that accounts for only a small portion of the difference. I suspect there might be a considerable skim to the gummint in taxes on the way thropugh the supply chain. The supermarkets in wach country operate with similar profit margins so the Greens and all the other commies are chasing down the wrong alley if they think that is the cause.

    I need to double check the spreadsheet to make sure I’m comparing like with like and specials with specials etc.

    Will let you know when it is complete.

    Meanwhile, perhaps someone with the technical skills required could have a look at beef, lamb, pork, chicken, oranges, apples, potatoes, carrots and onions to see where the skim rreally is taking place.


  7. gravedodger says:

    I wonder Ele If you and / or your farmer could give us an idea of the average per liter price farmers receive for bulk milk. I assume there is still a premium for Winter milk
    I know payment has many variables, solids, protien etc but I pay around $2.15 a liter for branded dark blue top , gave up on the yellow that was around a $1.20 dearer.
    Don’t get me started on the green top, what they charge for what seems like bottled tanker wash is appalling.

    Took a while to readjust to the creamier taste but at around 6 liters a week I am well on the way to paying for my “happy hour” Friday extravagance.

    BTW Swmbo didn’t react well to a suggestion of a house cow and a couple of pigs when we moved back out of town eight years ago to Alzheimers Valley.


  8. homepaddock says:

    There’s a formula for translating the kg of milk solids price farmers get to $/litre but I’ll have to do some research, GD.


  9. homepaddock says:

    GD – the answer is here: http://www.fedfarm.org.nz/milk

    “Federated Farmers has welcomed Fonterra Cooperative Group locking in $7.50 per kilogram of milk solids (kg/MS) as its forecast milk price for the 2010/11 season. At about 66 cents per litre for liquid milk, the Federation cautions that this is revenue and not profit.”


  10. gravedodger says:

    Thanx Ele so we start with 66 c, collect it, refrigerate it, test and monitor it, process it, package it, warehouse it, distribute it then retail it, all with the life and quality being at risk.
    End up with branded milk in the fridge here in Paradise for $2 20 per liter.
    Not much room for exploitation there.
    Recently had six cubic meters of pea metal that cost sweet all to create but extraction, processing and freight plus profit cost $100 per meter delivered and spread on our carpark, now that looks dodgy so maybe I’ll get Sue Chetwin to look into it.


  11. Adolf Fiinkensein says:

    After carefully double checking that no ‘special’ prices are included, my basket of groceries costs $78 in Gawler and $100 in Auckland.

    GST would account for about 10 to 12 percentage points of the difference as there is no GST on unprocessed food in Australia.

    So, where is the other $20 in very hundred going?


  12. robertguyton says:

    “Federated Farmers and Fonterra are both pleased that the Commerce Commission has decided it has no basis for a price control inquiry into milk.”

    How will they feel, I wonder, about Key’s turn-around and indication that the Government will hold an enquiry?

    Must be making them all confused!


  13. ploughboy says:

    why dont the polliys worry more about the price of power which they own instead of milk.why also dont they use the price of the cheapest brand dairy dale not the premium brand anchor


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