No bar­rier to other milk pro­ces­sors

Matamata Chronicle - - Rural Delivery -

Fed­er­ated Farm­ers be­lieves any com­pany re­ceiv­ing raw milk at the reg­u­lated price, con­cerned about re­tail competition, is free to in­stall a pro­cess­ing plant to sup­ply liq­uid milk to con­sumers.

‘‘I have no doubt that there are some who are us­ing the re­tail price of milk as a lob­by­ing op­por­tu­nity to se­cure a com­mer­cial ad­van­tage,’’ Fed­er­ated Farm­ers dairy chair­man Lachlan McKen­zie said. ‘‘ Yet the raw milk reg­u­la­tions un­der the Dairy In­dus­try Re­struc­tur­ing Act mean Fon­terra has to sell up to 600 mil­lion litres of its milk to other milk pro­ces­sors. This price is set at the farm gate price plus 10 cents per kilo­gram of milk solids to cover sea­sonal costs.

‘‘Trans­lated into plain English and based on the cur­rent fore­cast milk price, that works out to be just over $ 0.66 a reg­u­lated raw milk.

‘‘ Given a farmer’s share of around $0.652 a litre, Fon­terra’s mar­gin is some $0.0087 cents in ev­ery litre of the 600 mil­lion litres it has to sup­ply other pro­ces­sors un­der DIRA.

‘‘$0.0087 cents doesn’t go any­where near meet­ing the op­por­tu­nity cost to Fon­terra share­hold­ers in ef­fec­tively pro­vid­ing their milk on speed dial. It’s rob­bing Peter to pay Paul, es­pe­cially at the tail end of the sea­son when milk sup­ply tails off.

‘‘With the notable ex­cep­tion of Good­man Fielder and some other pro­ces­sors, a ma­jor­ity of pro­ces­sors re­ceiv­ing reg­u­lated raw milk are pro­cess­ing it for ex­port rather than sup­ply­ing liq­uid milk to con­sumers.

‘‘If there is a big mar­ket op­por-


for tu­nity in fresh milk then there’s noth­ing stop­ping other pro­ces­sors from en­ter­ing the lo­cal mar­ket­place.

‘‘It may have some­thing to do with whole­sale mar­gins. Af­ter pay­ing for and col­lect­ing milk from farms be­fore pro­cess­ing and de­liv­er­ing a per­ish­able prod­uct into stores, I un­der­stand Fon­terra’s profit mar­gin on whole­sale milk bound for con­sumers is around 12 per cent.

‘‘Whole­sale of course isn’t the re­tail price con­sumers pay in su­per­mar­kets be­cause un­der law, Fon­terra can­not set the re­tail price of milk.

‘‘I just can’t see any ev­i­dence of a rip off. More so, when Fed­er­ated Farm­ers com­pared lo­cal milk prices with what peo­ple are pay­ing over­seas,’’ Mr McKen­zie con­cluded.­ter­

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