Food producers 'not creaming it'

PHIL REID/Dominion Post

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A big farm lobby claims farmers are not the main beneficiaries of soaring prices for basic foods in New Zealand.

"Food producers are certainly not `creaming it'," said Federated Farmers president Charlie Pedersen.

His lobby today released an economist's report it said showed farmers were receiving only a quarter – on average – of the retail prices charged for bread, milk, butter, cheese, honey, lamb and beef.

Federated Farmers president Charlie Pedersen said that in the case of bread, a farmer received the equivalent of three slices of a 20 slice loaf.

The report, prepared by the Institute of Economic Research (NZIER) showed the shares farmers receive from retail prices were:

* Milk 35.46 per cent;

* Bread 16.37 per cent;

* Lamb chops – 30.97 per cent;

* Blade steak – 18.86 per cent;

* Honey – 40.12 per cent; and,

* Cheese – 5.3 per cent.

"The cause of high food prices is complex and outside the control of the food producer," Mr Pedersen said in a statement. "Transport, processing, energy and marketing, plus normal margins are some of the factors which have pushed prices up".

Statistics New Zealand this week released figures for the year to April showing grocery food prices have risen more than 10 per cent for the kinds of basic foods canvassed by today's report: butter is 86 per cent higher, cheese 45.5 per cent higher, milk 21.1 per cent higher and bread is up 13.1 per cent.

The surge in basic food prices – at a time when Fonterra's 10,000 dairy farmers are expected to pocket an average payout of over $700,000 in addition to soaring capital gains on land and cattle – has aroused concerns over how households will cope.

In liquid milk, the report said farmers were getting 10 percentage points greater share of the retail price in 2008 than in 2004: a rise from 25.35 per cent to 35.46 per cent.

Mr Pedersen said prices for commodities fluctuated and the good prices being paid by Fonterra this year will not necessarily occur next year.

"If you deliberately lowered domestic prices it would likely lead to a reduction in domestic food production and an increase in food exports," he said.

"There is a misconception that because dairy farmers are receiving good payouts from Fonterra, this is driving up prices".

There was is a link to export prices, "but this has never changed since New Zealand began exporting meat back in 1882".

About 95 per cent of NZ dairy products were exported which meant that high international prices were reflected in domestic prices. Australia exported about half its dairy production and the USA under 10 per cent.

Mr Pedersen said farmers faced higher costs for fertiliser and in meeting complicance costs of regulations such as those requiring basic environmental standards.

Farmers had also had to cope with a severe drought and pay high prices for supplementary feed for their livestock.

"Many sheep and beef farmers will suffer losses this year adding to the losses of previous years," Mr Pedersen said.

Despite owning land worth a lot of money, some farmers' net incomes were significantly lower than those of city dwellers.

New Zealand did not have subsidies to prop up its primary sector, unlike many other food producers in the world.

The report said that while the cost of a "basket of food" rose by 8 per cent in the past two years, average gross hourly earnings had gone up by 18 per cent.

- NZPA