21 Feb 2011

Fonterra praised for milk price freeze

8:00 am on 21 February 2011

The Food and Grocery Council says Fonterra deserves high praise for its decision to freeze the domestic wholesale price of milk.

The freeze, which applies until the end of this year, was announced shortly after Agriculture Minister David Carter said he was seeking advice from his officials about the cost of milk.

Food and Grocery Council chief executive Katherine Rich says Fonterra's "gutsy" move will cost the dairy cooperative many millions of dollars.

Ms Rich says milk is good value for money and not a luxury item. In real terms, she says, some milk is cheaper than it was 10 years ago.

Mr Carter has also welcomed the announcement but still wants his ministry to look at whether the milk market is operating competitively. He says he has given the ministry 10 days to deliver a report to him.

In Fonterra's 'best interests long-term '

The manager of Fonterra's consumer products division, Peter McClure, says milk sales have dropped by about 1% in the past few months and it's in the company's best interests long term to keep people buying milk.

Mr McClure says international milk prices have risen steadily over recent months and many New Zealanders feel they can't afford it.

Mr Carter says the decision is a fair acknowledgment from Fonterra that there is some public concern about the ever-increasing milk price.

Plunket branch supports investigation

Plunket in Northland is applauding the decision to investigate the high cost of milk. Area manager Di Lawson says Plunket nurses see many families who can't afford milk even at its present price.

Ms Lawson says meat, bread and fruit are also beyond many families' budget as everyday foods, and their young children are at risk of lifelong harm from poor nutrition.

She says nurses go into homes where parents are going without meals to feed their children.

Ms Lawson says a country that produces as much milk and produce as New Zealand should be able to find a way of making it affordable.

Warning prices could jump again

Federated Farmers is warning milk prices could jump steeply when the freeze expires at the end of the year.

The organisation's dairy chairperson, Lachlan McKenzie, says farmers make hardly any money from milk and the middle man makes all the profit.

Mr McKenzie says moratoriums on prices inevitably build up a pressure behind them and when the freeze comes off, things turn dramatically as the market readjusts.

In response, Mr McClure says it's too soon to say what will happen when the freeze is lifted but Fonterra will review the situation at the end of the year.