Farmers welcome Commerce Commission preliminary analysis
Released 30 Mar 2011
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$357.25 each year to subsidise their dairy industry according to OECD data.
"It's the same in Europe. While British milk may be slightly cheaper at the checkout than ours, the sting comes in the financial aid to UK dairy farmers. A recent UK Parliamentary answer found that in the year to February 2010, the average British dairy farm received £32,300 in subsidies.
"Once you factor in checkout prices and subsidies, New Zealand retail milk seems to be among the cheapest in the six countries we've studied," Mr Leferink concluded.
For further information contact:
Willy Leferink, Federated Farmers Dairy vice-chairperson, 03 302 6891, 021 796 037
COMPARIATIVE MILK PRICES:
|
Milk price using official or industry statistics |
1 litre of milk in NZ$ equivalent with GST factored in December 2010* |
2009 dairy farm related subsidies. Effect on households per annum (NZ$ 2009 average FX**) |
2009 dairy farm related subsidies. Effect on households per annum (NZ$ 2010 average FX) |
||
|
United States |
$ 1.35 |
$ 54.08 |
$ 46.88 |
||
|
New Zealand |
$ 1.81 |
$ - |
$ - |
||
|
United Kingdom^^ |
$ 1.62 |
$ 68.63 |
$ 57.21 |
||
|
Australia |
$ 2.74 |
$ - |
$ - |
||
|
Ireland^ |
$ 2.31 |
$ 610.45 |
$ 496.35 |
||
|
Canada |
$ 3.35 |
$ 380.62 |
$ 357.25 |
* Baseline is December 2010 except Ireland, which, due to its official statistics, is May 2010. Subsidy data is for 2009.
** Annual average exchange rate for 2009 is used to generate a NZ$ equivalent for Dairy Programme Subsidies divided by households
^ In 2009, Irish dairy farmers received the equivalent of NZ$897m in direct support from the state and the EU (the average subsidy was €20,663 per dairy farm)
^^ In 2009, British dairy farmers received the equivalent of NZ$1.31bn in direct support from the state and the EU (the average subsidy was £32,300 per dairy farm).
Sources:
Various including official statistics and the OECD
AUSTRALIAN MILK PRICES (PRE-PRICE WAR):
|
Australian City December quarter 2010 |
Milk 1 litre equivalent (AU$) |
NZ$ Conversion December average AU$ bought NZ$1.32214) |
NZ$ equivalent but with NZ GST factored in - milk is zero rated for Australian GST |
|
Perth |
$1.58 |
$2.08 |
$2.39 |
|
Brisbane |
$1.59 |
$2.10 |
$2.41 |
|
Adelaide |
$1.75 |
$2.31 |
$2.65 |
|
Melbourne |
$1.81 |
$2.39 |
$2.75 |
|
Hobart |
$1.83 |
$2.42 |
$2.78 |
|
Sydney |
$1.87 |
$2.47 |
$2.84 |
|
Canberra |
$1.95 |
$2.57 |
$2.96 |
|
Darwin |
$2.07 |
$2.74 |
$3.15 |
|
Average |
$1.80 |
$2.38 |
$2.74 |
Source:
http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6403.0.55.001Dec%202010?OpenDocument
