Farmers welcome Commerce Commission preliminary analysis

Federated Farmers is welcoming the Commerce Commission’s preliminary analysis into retail milk prices as a chance to help end the speculation over milk prices.

“Lachlan McKenzie is currently travelling in the United States and has emailed to say that milk is not cheaper there,” says Willy Leferink, Federated Farmers Dairy vice-chairperson.

“The disappointing aspect to date has been the poor analysis of international retail milk prices. That the ‘milk price clock’ has been turned back two decades in Australia seems to have been completely missed by some commentators.

“Three other major factors seem to have been missed as well. These are comparative exchange rates, the fact our milk attracts Goods and Services Tax (GST) and, finally, the hidden but major cost of producer subsidies.

“New Zealand ended producer subsidies some 26 years ago but according to OECD sources, these are still alive and kicking around the world. Subsidies cost overseas consumers twice, first at the checkout then through the taxes they pay.

“When Federated Farmers compared retail prices from December 2010, we found New Zealand retail milk prices were in fact much lower before Australia’s ‘milk war’. We have now revised these figures to account for the fact Australian milk does not attract their version of GST.

“So long as you know to look behind the retail sticker you can arrive at an apples-with-apples comparison.

“Federated Farmers is currently analysing retail pricing in the United States, United Kingdom, Ireland and Canada. This is data we’ll be providing to the Commerce Commission.

“On our raw data to date, we’ve found that Canadian milk is the most expensive at NZ$3.35 per litre. On top of that, each Canadian household pays something like NZ$357.25 each year to subsidise their dairy industry according to OECD data.

“It’s the same in Europe. While British milk may be slightly cheaper at the checkout than ours, the sting comes in the financial aid to UK dairy farmers. A recent UK Parliamentary answer found that in the year to February 2010, the average British dairy farm received £32,300 in subsidies.

“Once you factor in checkout prices and subsidies, New Zealand retail milk seems to be among the cheapest in the six countries we’ve studied,” Mr Leferink concluded.