A crumb of comfort is that shop prices shouldn’t rise by more than a few cents as a result of the latest 10 per cent hike in Fonterra’s forecast prices for milk powder.
Any retail price increase caused by the higher forecast payouts should also be many months away.
The dairy giant this week lifted its 2016-17 forecast farmgate milk price by 50 cents to $5.25 per kilo and reported a bumper $834m profit.
Even if its higher forecast pay-outs prove on the money, that would add only 3.5 cents to the cost of producing a litre of Anchor Blue milk.
It contains 33 grams of milk protein and the same quantity of milk fat – worth 37c at the new payout price.
A litre of Anchor Blue currently costs $2.19 at New World Thorndon and $2.69 at Countdown, though both supermarkets are selling non-branded standard milk in a 2-litre package at the same price of $1.58 per litre.
In Britain, the cheapest milk at Tesco currently sells at half that price – 44p (NZ78c) a litre.
The difference appears mathematically too great to be explained by any difference in the prices or production subsidies paid to European farmers, even taking into account that milk does not – as a basic foodstuff – attract sales tax in Britain.
New World owner Foodstuffs’ spokeswoman Antoinette Laird said each market had different levels of regulation and subsidies and retailers’ pricing strategies could «also be quite varied».
«There are a number of costs to deliver daily fresh milk to our stores; transport, refrigeration, merchandising and production costs.
«The average price paid by the New Zealand consumer in our stores has remained pretty constant over the last few years,» she said.
Countdown’s dairy merchandise manager, Nikhil Sawant, said customers had been enjoying relatively low milk prices.
«In August milk was down 5.9 per cent versus the same time last year. We would expect that retail prices do increase over the coming months as the price paid to farmers increases, but we won’t know what that means for customers until our suppliers tell us what the increase is,» he said.
«We can’t comment on retail milk prices in the UK; it’s a different economy on a very different scale,» he added.
Laird said retail prices tended to lag changes in the milk powder price by about three months as the latter worked their way through the supply chain.
«As soon as we receive the price change we reflect this on shelf.»
NZ First leader Winston Peters attacked Fonterra earlier this year for raising the price that shops needed to pay its for milk by 5.5c a litre on January 18, when milk powder prices were in a slump and heading south.
Fonterra Brands acting managing director Jonathan Box’s response was there was «inevitably a lag» between wholesale and retail prices.
Source: Stuff
Link: http://www.stuff.co.nz/business/industries/84536518/cost-of-milk-powder-far-from-the-whole-story-for-milk-prices
