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Call for Fonterra to lower domestic dairy prices

12 September 2008

Greens call on Fonterra to lower domestic dairy prices

Today Green Party MP Sue Kedgley has called on Fonterra to reduce the domestic price of cheese and dairy prices, following its admission that international dairy prices have fallen sharply in recent months, and by 38 percent in the past 14 months.

Earlier this year Fonterra justified extraordinary price rises of dairy products in New Zealand by claiming high domestic prices were caused by high export prices, Ms Kedgley says.

"But now export prices are falling, it says New Zealanders cannot expect a similar fall in domestic dairy prices. Earlier this year Fonterra told us domestic dairy prices are set by international prices. Yet when international prices fall, they now claim domestic prices need to remain high.

"This has to be nonsense. Fonterra cannot have it both ways, and claim that domestic prices need to remain high whether export prices are rising or are falling.

"New Zealanders need a better explanation from Fonterra about why domestic prices are so absurdly high."

Ms Kedgley says Fonterra's attempted justification for the continuing high domestic prices - in the face of falling global prices - looks flimsy.

"They claim that lowering international prices won't result in lower domestic prices because they have 'factored in the lower international values' into their price calculations. This doesn't seem plausible to me. I don't believe that - way back in February - Fonterra knew dairy prices were going to fall, as they have in the past few months."

Ms Kedgley says the real problem is that Fonterra is effectively a monopoly in New Zealand, cornering 96 percent of the domestic dairy market.

"What we are seeing is monopoly pricing, and I urge the Commerce Commission to speed up their investigation into Fonterra's domestic price setting practices."


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