Why pick on farmers?

The Herald editorial praises Fonterra for its milk-in-schools scheme but is still thinks the price of milk is too high.

What appears to be the nub of the problem – how Fonterra sets the price it pays farmers for their milk – is also being examined by an interdepartmental group. Its report is due by the end of this month. But if its work on the mechanics and methodology of the confidential formula used by the company since 2009 informs that of the parliamentary committee, it should not supplant it. The public would be best served by its representatives determining whether the price paid to farmers is set higher than it should be to stifle competition, and if this should be fixed by having it set by an independent commissioner.

Why pick on farmers? The price paid to the producers is only one factor in retail cost of milk.

Between the farm gate and consumer are the costs of picking up, processing, distributing and retailing all of which add margins.

As for price fixing by anyone, independent or not, that would be a very draconian step which could well have perverse results.

When the Argentinean government tried to bring down the price of meat for domestic consumers by imposing high taxes on the exports farmers simply converted to more profitable produce.

Domestic milk production is a tiny proportion of Fonterra’s market. If the farmers who supply it don’t get the same as those who supply for the export market they will stop supplying it.

That aside, the nub of the problem isn’t the price of milk nor how it’s set. The nub of the problem is not the high cost of milk or nay other food, it’s low incomes and that won’t be addressed by price fixing.

2 Responses to Why pick on farmers?

  1. Andrei says:

    I reckon the price for a copy of the New Zealand Herald is too high -the Government oughta pass a law that sets the price per copy home delivered at 5c


  2. homepaddock says:

    Would that price include South Island rural delivery? 🙂


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