Many reasons for high milk prices in NZ

21 August 2018

An article on Stuff, entitled ‘Milking it: NZ's milk price: Who's getting rich?,’ blamed "astoundingly high” prices on our lack of retail competition, a market dominated by one big supplier, and  the fact that what Kiwis pay is skewed by international prices because so much of our production is turned into export commodities.

It said a litre of fresh milk in Germany was the equivalent of $1.51 compared to $2.37 in New Zealand, and quoted Consumer NZ's estimate that for every $3.56 bottle of milk (an average retail price at present) about $1.19 would go to the farmer, $1.91 to the processor and retailer, and 46c to GST.

Some points it didn’t make:

  • New Zealand has a 15% GST on milk which can be 50 - 85 cents. Many other countries exempt milk or have a much lower rate.
  • Exchange rate differences & fluctuations
  • Many global dairy farmers receive significant taxpayer subsidies eg UK, Germany, Canada.
  • New Zealand is a tiny market (smaller than Sydney) with consumers spread out over a large area (the size of Japan). This increases many costs, particularly for distribution.
  • Milk price wars in Australia, UK and Germany have resulted in short-term gains for shoppers, but long-term carnage for their dairy industries.
  • Cost increases: With increases to fuel taxes (remember that transport and freight is a significant cost), a series of hikes in the minimum wage and the flow-on effect for other earners, increases in packaging costs, energy and other costs - eventually it has a flow-on effect to prices.

 

The Stuff article is here