KEY POINTS:
Dairy giant Fonterra last night backed away from further price hikes after Green Party co-leader Jeanette Fitzsimons challenged it to make its products affordable for New Zealanders.
The co-operative has been accused of creaming it, with the price of milk up 23 per cent, cheese up 60 per
cent and butter up a whopping 92 per cent in the year to March.
Speaking at her party's annual conference in Auckland yesterday, Fitzsimons appealed to Fonterra to "give back" to New Zealand by unhitching domestic and international prices.
The co-operative has defended past price rises by explaining that Fonterra Consumer Brands, the division that produces and sells the dairy products we see on supermarket shelves, must buy its raw ingredients from Fonterra at prices fixed by the international market.
"Show us you are a good Kiwi company," urged Fitzsimons. "Give something back to the country that has provided you with a great climate, cheap energy and hard-working farmers that have allowed you to become so successful."
With only 4 per cent of Fonterra products sold here, she argued the co-operative could keep its domestic prices down without hurting New Zealand farmers.
"It's only because, globally, the elite in the countries where we sell are prepared to pay very high prices for milk commodities that the price has gone up so much in New Zealand," she told the Herald on Sunday. "It's not actually necessary to give farmers a fair return."
The latest payout forecast for this season is a record $7.90 a kilogram of milksolids - giving a total payout of $9.6 billion, $4b more than last year.
Yesterday afternoon Fonterra Consumer Brands manager Peter McClure hinted at further price rises in coming weeks.
He told Radio New Zealand the co-operative "took a hit" when the last forecast payout was announced and that it was unlikely it would be able to subsidise the price of milk any longer.
"The reality is that in the past year I've taken a 25 per cent reduction in my margins in milk, so we've already subsidised the domestic market if you like."
Last night, McClure appeared to back-pedal, telling the Herald on Sunday more dairy price rises by the end of the year were unlikely.
"I can't rule it out but I don't think it will be likely, given the forecasts we have."
McClure claimed Fonterra was already playing its part in buffering New Zealanders from global trends by not passing on every international price rise.
"Of course we understand that people are hurting and it's not just in dairy, it's across a broad range of food products.
"But we have effectively subsidised [milk] prices here by $15m or more this financial year. That's about $1500 per farmer."
Asked if Fonterra would consider unhitching the domestic market from the global one, McClure said: "What are you suggesting, that somehow the farmers subsidise more than they already are?"