Fonterra rejects calls for inquiry into milk prices

  • 23/03/2011

By Simon Shepherd

Fonterra is rejecting calls for an inquiry into how milk prices are set.

The company says prices are set as part of a normal commercial process and that New Zealanders have to get used to being part of the global market.

It's a market that is so strong, dairy farmers could have their best year ever.

The world still wants our white gold and Fonterra says as part of that world, that’s how the milk price is set.

“We don’t see any need for anyone to dig into a normal commercial market,” says Fonterra chief executive Andrew Ferrier.

A coalition of consumer groups and the Green Party want a Commerce Commission investigation into milk prices because it claims Fonterra has a virtual monopoly.

“And is this virtual monopoly one of the reason milk prices are so high in New Zealand,” says Green MP Sue Kedgley.

Fonterra has frozen the wholesale price of its domestic milk until the end of the year – a business decision it says.

But it won’t entertain the idea of keeping domestic pricing separate from the international demand.

“The world’s globalising, whether it’s dairy, oil, energy, the prices are pretty much the same and New Zealand is part of that and that’s not going to change,” says Fonterra chairman Sir Henry van der Heyden.

Global demand means farmers are on target for a cash payout of about $7.75 a kilo of milk powder – equal to the record high.

That kind of payout means, on average, each dairy farmer would receive $890,000 dollars – good news for them but it doesn't necessarily mean there will be a spending spree.

“Some of them over extended themselves and the chief responsibility now and priority will be to pay down that debt,” says ***.

Dairy farmers are being warned by Fonterra no one can predict how long the milk market will stay this high.

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source: newshub archive