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Current as of 31/10/14 07:40PM NZST

Owen Hembry

Business news editor of the New Zealand Herald

Milk products tipped to get even pricier

Cheese prices have risen 17 per cent in the past year. Photo / Christine Cornege
Cheese prices have risen 17 per cent in the past year. Photo / Christine Cornege

High prices for milk, butter and cheese are to rise even more as international dairy prices continue climbing.

The average price for products on Fonterra's bi-weekly international auction has increased for the sixth consecutive time - up 3.9 per cent.

The prices for raw dairy ingredients in the auction are up 23.8 per cent since December.

In shops, butter prices have risen 40 per cent, cheese 17 per cent and milk almost 9 per cent in the past year.

BNZ economist Doug Steel said prices in New Zealand tended to follow international prices with about a nine-month lag.

"Given that prices were starting to ramp up from last November, I'd expect domestic prices to be lifting through 2011, not only for dairy products but for other commodity based-products as well.

However, it was difficult to be precise about the scale of price rises.

"Obviously there's a lot of margins and a lot of players between what's traded internationally and when you buy a product on a supermarket shelf.

"Any one or all of those could move, as well as other costs that are going up, particularly transport costs because of oil prices," he said.

"So it is hard to be precise but certainly there's a significant amount of upside pressure to domestic food prices in the next wee while."

However, domestic food prices were unlikely to rise to the same extent as overseas as the New Zealand dollar was higher than normal.

NZX Agrifax dairy analyst Susan Kilsby said dairy prices had been tracking up quite rapidly.

"We've seen that not just in dairy commodities but in all commodities generally."

New Zealand consumers here could expect to see increases in the price of dairy products, with about a three- to six-month delay between changes in global commodity prices and those in supermarkets, she said.

Fonterra Brands New Zealand managing director Peter McClure said consumer prices could be nearing the top.

"I would think we're pretty much near the top of the cycle [for shelf prices]," he said. "I'm not ruling it [price rises] out altogether, but it's getting pretty well up there."

The consumer products division of Fonterra, whose brands include Anchor and Mainland, operated at arm's length from the co-operative, and had to buy materials based on international prices.

Mr McClure said the company passed on as much of the cost increase as it thought the market could bear.

- NZ Herald

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