KEY POINTS:
The Commerce Commission is looking at the price of dairy products after big jumps in milk and cheese.
The price watchdog said it was not yet a formal investigation, but a spokeswoman said it wanted to understand why the cost of milk, butter and cheese had risen so
sharply.
"The Commerce Commission is gathering initial information from market participants in the domestic milk market to better understand the issues arising around increasing dairy product prices," she said.
The price of a 1kg block of mild cheddar has risen 65.8 per cent since April last year, according to the consumers price index.
A Weekend Herald investigation this month found that the price shoppers are paying for cheese in New Zealand supermarkets has increased more quickly than the price paid to farmers for milk, the main ingredient.
The Commerce Commission's move comes after a complaint by Wyatt Creech, a former deputy prime minister in Jenny Shipley's National Government.
Mr Creech, who is chairman of the Kaimai Cheese Company and a director of Open Country Cheese, said the commission had accepted that his personal complaint needed further work.
"They're now doing an investigation phase that'll finish about the end of June, and they'll make a decision there whether to take it further or not," he said. Statistics New Zealand's Food Price Index shows milk rose from $1.32 a litre in December 2006 to $1.61 last month, butter is up from $3.96 a kilo to $7.50 and cheese from $6.66 a kilo to $10.78.
Prices can often be higher. A Weekend Herald price check at the Devonport New World supermarket last week found 1kg of Mainland Tasty cheese cost $16.15, Mainland Mild cheddar cost $13.95, Budget Tasty was $12.55 and Budget Mild $11.15.
At Foodtown Grey Lynn, 1kg of Signature Range Tasty cost $13.79 and Anchor Tasty $15.29 for a 900g block.
Factors behind the international dairy commodity boom include reduced supply, drought in Australia, biofuel production driving up the costs of feedstock, world economic growth and demand from emerging markets.
The forecast payout by Fonterra to farmers this season was $7.30 a kilogram of milk solids, up from $4.46 the previous season.
When converted to a per-litre-of-milk figure, the price paid to farmers equated to a rise from 38c to 63c, Mr Creech said.
He wanted the Commerce Commission to investigate why the price of milk had risen so steeply when the price paid to farmers had risen by only 25c a litre.
"The supermarkets say they haven't changed their margins at all and Fonterra says it hasn't increased the amount it has got out of it and the freight operators are saying they're being squeezed ...
"If you listen to the public statements, everyone's worse off than they were a year ago."
Foodstuffs Auckland general manager for retail Mark Baker said a number of costs had increased, including fuel and labour.
"The cost pressures on suppliers and retailers, I think, are probably the highest they've been in the past 15, 20 years," he said.
"On the total dairy category our profitability is similar to previous years."
A Fonterra representative said: "There is plenty of competition in the retail milk market and we comply with all the regulations."