Fonterra: Dairy price rise not our fault

Milk costs too much, critics say. Photo / Thinkstock

The price of many dairy products is set to rise from Monday - but Fonterra says it's not their fault.

Dairy manufacturer Goodman Fielder has told its customers it is putting up prices because Fonterra is increasing the price of the milk sold on to manufacturers.

The increase will see Goodman Fielder - which owns brands such as Meadow Fresh, Tararua and Chesdale - increase cheese and butter prices by around 9 per cent and yoghurt by around 6 per cent.

Fonterra's chief executive Andrew Ferrier said the dairy giant was not to blame.

"The world price sets the price Fonterra sells milk in New Zealand," Mr Ferrier told Newstalk ZB. "The world prices have gone up.

"That is actually a good thing for New Zealand - Fonterra's prices going up means more money for New Zealand."

However, milk prices are not set to rise, as Fonterra's brands division in February placed a freeze on their prices - so milk prices will remain the same for the remainder of the year.

Mr Ferrier said dairy price increases were no larger than price rises for other food items.

Meanwhile, as the Commerce Commission considers whether to hold a price control inquiry, Fonterra has revealed its profit margin on a two-litre bottle of milk.

Mr Ferrier told Campbell Live last night the company had a 12 per cent profit margin.

Foodstuffs could not be contacted by Campbell Live and Progressive Enterprises would not reveal how much profit it made from milk sales. However, the company said it made a profit margin of less than 5 per cent across all product lines.

The admission from Fonterra comes as concerns grow over the price of milk, as prices have climbed to the highest nominal level ever, at $3.68 for two litres in February.

But figures released earlier this week showed in "real" terms milk actually cost more in 2002 and 1994.

Statistics NZ examined the retail price of milk from the 1890s, when a quart cost just over three pence, to this February when the average price hit $3.68 for two litres (based on the cheapest available brand).

Full deregulation in 1993 meant milk could be sold at any price and in January 1994 the average price for a two-litre container was $2.37 - equivalent to $3.78 today.

Home delivery milk dwindled during the 1990s, the article said, and following a high point for export prices the retail price in January 2002 hit $3.20 - equivalent to $4.18 today.

Consumer NZ chief executive Sue Chetwin said people paid too much for milk and deserved to know how prices were set.

The Commerce Commission last month said a number of parties had laid complaints about the retail price of milk and it was undertaking preliminary analysis to determine whether a price control inquiry was warranted.

A report on whether to launch such an inquiry will be finished in around two months.

Mr Ferrier told Campbell Live his company would co-operate with the inquiry if it went ahead.

"We will give the Commerce Commission our entire milk price manual," he says. "As soon as they explain what they want we need to know what they are getting at in this one."