WHY BUTTER, MILK PRICE GO UP

STEMMED FROM WORLD MARKET RECESSION DURING COVID-19 PANDEMIC According to the Food & Agriculture Organization (FAO), the increase in world dairy prices in 2021 was mainly driven by China’s imports

This week we look at dairy and associated products, how Fijian consumers should expect price increases for these locally, and the reasons why prices are on the rise.

Economies across the world are still recovering from the immense impacts of the COVID-19 pandemic, which caused massive recession in many countries.

The overall effects have been devastating - for example, almost one billion workers around the world lost their jobs because of the spread of the virus. In a short amount of time, the global transportation sector was forced to stop.

Essential goods and equipment for essential services could not be easily sourced.

A large percentage of the goods we consume come from overseas. We cannot mine iron and copper, we cannot make computers, we cannot make microchips and we don’t produce enough milk to supply all of the demand of our population.

The spillover effect from these factors meant that many goods, manufactured products, and services that relied on these global services, as well as goods sourced from overseas, have become scarcer, and more expensive to get.

This includes things such as fuel, raw materials for building, computers and imported foods like produce (potato, onions and garlic), wheat, edible oil and of course - dairy products.

In fact, the outbreak of COVID-19 has placed a massive constraint on the milk and butter manufacturing market in 2020, as supply chains were disrupted due to trade restrictions and consumption declined due to lockdowns imposed by governments globally, which has been carried into 2021 and onward.

The Global Dairy Industry, which is the source of three major price regulated items - powdered and liquid milk, and butter, has been experiencing rising global milk production post COVID-19 to date.

According to the Food & Agriculture Organization (FAO), the increase in world dairy prices in 2021 was mainly driven by China’s imports.

China is the world’s largest dairy importer, and in 2021, imports surged significantly due to rising demand from consumers, the food processing industry and increased food services activities.

Import demand also rose in several other countries, including Mexico, Indonesia, Vietnam and Bangladesh, reflecting increased market activities and consumer demand.

Fiji’s major dairy source, Fonterra, based in New Zealand, is experiencing expanding overseas demand and higher milk prices offered by the leading dairy cooperative.

This has put pressure on Fonterra’s product prices to rise.

With such price movement globally, coupled with Fiji’s new labor wage amendments and nominal inflation, the prices of most milk brands available in the market are expected to rise.

Price increase

In fact, the prices of Rewa Powdered Milk and Rewa Butter, increases effective from June 24, 2022.

As alluded to above, this means that butter, which is produced from the protein and fat portion of milk, will also increase in price.

Similar to price movement captured by FAO in graph 1 above, the average butter price has been rising since 2021. Though fluctuating, the general trend has taken an upward trajectory.

It is important to note that our domestic prices are largely driven by the prices for the goods we import from overseas.

The prices for these overseas goods are set by global manufacturers, which as a small Pacific Island Country

we have no choice but to accept.

There are measures being taken to help consumers deal with this inflation, such as the work being done by the Fijian Government to help many people and businesses through many initiatives, grants and programmes.

Notable among these initiatives has been the removal of VAT from essential items, which includes liquid and powdered milk. FCCC has also played a role in this, by ensuring traders are passing on the benefit of this initiative to Fijian consumers.

In addition, FCCC remains committed to ensuring that our markets are sustainable for both consumers and traders.

We regularly conduct on the ground inspections, monitoring and ensuring regulated prices for essential goods are being complied with.

At the same time, it is important to remember that these measures cannot completely eliminate rising costs, which means that all Fijians will need to do their part as consumers and prepare to be more frugal in the days to come and practise prudence in their spending habits.