Price of dairy products

[toothbrush]

I got this about a month ago. thought some people might be interested.

12 April 2011

Dear Colleagues



There’s been a bit of talk recently about the cost of milk in New Zealand and its impact on household budgets. In defending our position we’ve been reluctant to get into the specifics of our product margins, but it has become clear that unless we do, this debate is not going to go away. It makes no sense to have our reputation in New Zealand damaged when the facts do not support the accusations being made against us.



I’m very aware that you will all have been questioned by your friends and family about this because you work for Fonterra, so we would like you to have the facts around margins.



On average, Fonterra currently makes around 12% net profit on the price we sell milk to retailers.

· 12% is at the lower end for the grocery trade.

· Of the five other major dairy companies with their own supply currently operating in New Zealand, none are supplying domestic milk. This is because those companies are likely to be making more money by exporting.

· If profits were so high in the NZ consumer milk market, surely more companies would be targeting this area?



All food prices throughout the world have gone up and milk is part of that trend

· International prices (based on gDT) have increased 35.5 per cent in the 12 months to February 2011 while the retail price of 2 litre blue top has increased just 9.5 per cent. (Statistics NZ).

· Our consumer business has frozen domestic prices until the end of the year because we know NZ consumers are feeling the pain. So if international prices go up this year, they won’t be passed on to NZ consumers.



Milk is great value

· It’s ridiculous to compare milk with soft drinks – milk is a super food.

· For less than $1, a glass of milk provides 15 essential nutrients and vitamins, as much protein as an egg, as many carbs as a quarter cup of rice and the same calcium as four cups of broccoli.

· We’ve looked at milk prices all around the world and New Zealand’s are in the bottom quarter. Until December last year, New Zealand milk was cheaper than Australia’s. The recent milk price war in Australia is unsustainable.



In recent times some of our competitors have been suggesting that we are holding the Fonterra farmgate Milk Price artificially high and that this is reducing competition in the NZ market. This is nonsense. Firstly, our farmgate Milk Price is based on international sales (which are completely transparent via globaldairyTrade) and is subject to three layers of rigorous review.

Secondly, in the last three years competitors have picked up an extra 750 million litres from farmers, and bought an extra 100 million litres from Fonterra under the DIRA regulations. If our farmgate price was so high, why are they growing?



I hope this give you a bit more information. Please check out Milkyway if you’d like more detail.



Regards

Andrew

[FC]

Apparently the whole "food is so expensive these days" line is pretty iffy too. Most prices are actually below what they were 10 years ago* (accounting for inflation).



* not a real statistic, similar to something i heard/read.

[toothbrush]

90% of statistics are made up

[dustbinflowers]

It is cheaper for me to buy dairy products from my little, expensive organic grocers than to buy Fonterra from the supermarket. Before that I was buying cheaper milk powder from Australia rather than NZ milk.

[kimura]

People need to eat less Dairy anyway, dairy is a good source of certain nutrition but a tonne of people in NZ make it their diets main staple.

High price is good in that respect, just like high petrol will cause people to ride a bike/get a train

[Andrew_TA]

· It’s ridiculous to compare milk with soft drinks – milk is a super food.

lol

[toothbrush]

Yeah, i can't get over how much spin is in that email.

[Dick Dynamite]

It's a blimming disgrace! Why do I, as an average Kiwi bloke, have to pay export prices for a bleeding block of edam cheese to give my kids their afternoon calcium!?

A blimming disgrace.

[Phlegm]

People need to eat less Dairy anyway, dairy is a good source of certain nutrition but a tonne of people in NZ make it their diets main staple.

High price is good in that respect, just like high petrol will cause people to ride a bike/get a train

Bread has risen too. Curious, if you feel the same way about it?

[kimura]

Yes, especially that tiptop garbage.

I try to have no bread in my house, otherwise I am going to eat it all with margarine & 100's & 1000's within an hour.

[rex]

if everything works out i'l be going sharemilking this year,looking forward to the money.

[Marrow]

Good read, taken with a pinch of salt. Still doesn't really explain why places in europe that have hardly any internal dairy farming pay so much less for milk products though

[JJ 2011]

For you cunts who complain about bread, buy a bread maker, they are tops.

As for everything else, yup they are just trying to fuck society, National and the politics have fucked up and want the small man to pay more and get less.

[Phlegm]

For you cunts who complain about bread, buy a bread maker, they are tops.

Who's complaining? The cheapest loaf in my local Pak 'n' Save is $1.61....it was 1.41 a few months back.

[Martli]

In real terms Milk was more expensive in the late 90s.

[akaxo]

Is the rural sector paying enough tax?

The average dairy farmer pays less tax than a couple on the pension – raising questions about whether the sector touted as the backbone of the economy is paying its fair share.

As the Government prepares one of the tightest Budgets in recent years, cutting into middle-class family benefits and KiwiSaver subsidies, new figures suggest the cuts will hit those also shouldering the greatest tax burden – wage and salary earners.

Inland Revenue Department figures provided to Labour revenue spokesman Stuart Nash show that, in the latest full year for which figures were available, the average tax paid by dairy farms was $1506 a year, despite an average Fonterra payout understood to be well over $500,000.

The 17,244 registered as being in the sector, including companies, trusts and individuals, paid only $26 million in tax.

The figures also show that more than half – 9014 – reported a loss for the 2009 year and 2635 reported trading income of between $1 and $20,000.

Federated Farmers chief executive Conor English said he was not surprised by the figures.

"The reason why there's not much tax being paid is because there hasn't been much money made. The average dairy farmer ... made a cash loss of $50,000."

There was more debt because farmers had been borrowing from the bank to pay for groceries. "The myth of the stinking rich farmer is simply not true."

Mr Nash said Labour would investigate whether farmers in general were paying a fair tax share.

Of the nearly 72,000 companies in the primary sector, nearly 40,000 were unprofitable

"Either we have a sector in dire financial trouble or the sector is simply writing off a lot of income against expense and not paying tax," Mr Nash said. "I hope it's the latter. If they are facing dire financial trouble then we as a nation are in the poo."

The IRD figures showed the agricultural sector, including forestry and fishing, paid $319m in tax in 2009. That compared with $486m from mining. Industry as a whole paid $9.7 billion tax and $23b came from personal tax.

back bone of the nation huh? creative accounting to avoid tax or a fuck load of groceries, take your pick...


note federated farmers ceo conor english is bill english's brother, not too relevant here but worth remembering whenever they come out with their pro-nats press releases etc.

[Red_switch]

It's easy to be rich when your farm owns all your stuff and a waterski boat is an "asset"

[Dick Dynamite]

If you own a freaking farm you can't really pretend you're in financial hardship...

[akaxo]

oh but the federated farmers ceo explained all that, the poor buggers had to borrow money from the bank to buy groceries...

[Phlegm]

Most farms are owned by the bank.

[hiv-positive]

Farming is incredibly expensive, and I'd say it takes a shitload of years to actually 'own' a farm.

[Dick Dynamite]

Lots of things are incredibly expensive - so expensive that I can't do them, so I don't...