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Kiwi consumers await Govt response on milk prices

Gordon Copeland Press Release
For Immediate Release
Wednesday, 19th March 2008

Kiwi consumers await Government response on milk prices

Independent MP Gordon Copeland, the Kiwi Party’s spokesperson on commerce, said today that he had been overwhelmed by the response he had received to his Monday press release asking the Government to initiate a Commerce Commission Inquiry into the price of milk in New Zealand.

“I knew of course that an increasing number of kiwi families are finding the purchase of milk for their children now beyond the reach of the family budget,” said Mr Copeland. “That in itself is a tragedy since milk has always been an essential part of the kiwi diet, especially for children.”

“What has surprised me, however, is the number of calls I have received from people with inside knowledge of the way the dairy industry is structured in New Zealand to say that I have hit the nail on the head and that a full inquiry must be undertaken by the Government as a matter of urgency.”

“People tell me, for example, that farmers receive only $1.20 for 2 litres of milk, which is just 37% of the $3.25 retail price. The other $2.05 is eaten up in processing costs, the dairy company’s margins, distribution, and retail margins.”

“The dairy farmers cite the retailer’s margin as the reason why milk prices in New Zealand are so high and there may be an element of truth in that. Certainly I have been told that companies who have tried to break into the market with cheaper milk have not been able to get it onto supermarket shelves because the big supermarket chains all have ‘sweetheart’ deals with the dairy companies.”

“A person I respect, with a great deal of knowledge about the way the industry has formed, put it to me, in fairly blunt terms, that the dairy industry in New Zealand is basically structured to maximise returns from the internal market, regardless of whether the resultant price ends up above or below that which is available in international markets.”

“As a busy MP, I am not in a position to unravel all the intricacies involved but I come back to the plain and substantial fact that, as a milk exporting nation, the local price should be comfortably below, and certainly not above, the price charged overseas.”

“Saudi Arabia is an oil exporting country which means that petroleum products are always cheaper there than they are in oil importing countries such as New Zealand. That of course is because the cost of freight, insurance, tariffs, and internal distribution costs, all have to be added on to the well head price of oil in Saudi Arabia.”

“I see no reason why the same logic cannot be applied to New Zealand when it comes to milk since we are a major exporting country.”

“In any event, I have called for an Inquiry and to date the response from the Government has been deafening in its silence. We need to hear from them, and fast.”

“Certainly, on the basis of the responses I am receiving, it is clear that there are people who are prepared to talk about anti-competitive behaviour in the New Zealand milk market and who would gladly give evidence to an Inquiry on a confidential basis.”

“High prices for milk are simply not the kiwi way and we must not allow this one to get away on us.”

Further Reading:
See article “Tough cheese for Fonterra’s rivals”, Former Deputy Prime Minister, Wyatt Creech, The Dominion Post, Wednesday 27 February 2008.

ENDS

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