Lower milk returns cuts prices for customers

ANDREA FOX
Last updated 05:00 23/05/2012

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If you were thinking that a milk price chop for dairy farmers should also mean one for you, Fonterra is way ahead of you.

Asked if the dairy giant planned to cut its retail milk prices after announcing yesterday it was lopping 30c/kg milksolids off the price it expects to pay its farmer suppliers this year, Fonterra said it already had – and we hadn't noticed.

Fonterra Brands New Zealand managing director Peter McClure said a two litre bottle of standard milk was 50c cheaper after the company made "significant" price adjustments towards the end of last month.

The price changes were in response to softening international dairy commodity prices – which were also responsible for squeezing dairy farmers' payout prospects for this 2011-2012 season and robbing the national economy of $500 million it had been anticipating.

Mr McClure, who last year fronted a public backlash against rising dairy prices at the supermarket chiller when commodity prices were on the way up, said the 50c reduction should apply to both branded and housebrand milks.

Cheese and butter retail prices had also eased a little, he said.

Fonterra Brands had also taken a knife to its supply chain and distribution costs which had contributed to the retail price cuts, he said.

Mr McClure said supermarkets had supported the wholesale price reductions with their own reductions.

"Budget" milk in a supermarket was the lowest it had been in two or three years, he said, with two litres of budget milk available in a supermarket for $2.99 these days

He could not say if further retail price cuts could be on the cards because of weaker commodity prices and the prospect of recession in Europe.

"We will have to look at that when they [commodity prices] come through. We are into a new [dairy] year and that [yesterday's payout cut announcement] was the first for the new dairy year."

As collector of 90 per cent of the country's raw milk, Fonterra sets the price of milk at all levels in New Zealand. The company, New Zealand's biggest, charges its Anchor-brand subsidiary Fonterra Brands NZ, the same price for milk as it does the country's other big consumer dairy product maker, Goodman Fielder.

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