Benefits of co-operative approach in dairy must not be lost

Media Release: Dairy Workers Union

Thursday September 15, 2011

Milk inquiry: benefits of co-operative approach in dairy must not be lost

The benefit that the co-operative dairy model brings to farmers, the provincial workforce and rural communities must not be put at risk by a false understanding of the drivers of milk prices, the Dairy Workers Union said today.

Parliament’s Commerce Select Committee will hear from the union at midday today during their inquiry into milk prices.

Dairy Workers Union National Secretary James Ritchie said the principal drivers of domestic milk prices were beyond the farm gate.

“We don’t believe that the price farmer shareholders receive for their milk is too high,” he said.

“Rather, the evidence suggests that it is the wholesale and retail margins on the price of milk in New Zealand that are inflated, which Consumer NZ have found is around 70% on the cheapest milk. That margin is much higher, of course, on more expensive, branded milk as the amount that farmers receive per litre is the same.”

He said the union’s view was that the co-operative basis of the New Zealand dairy industry has been and remains the single most important foundation of this country’s success as a dairy exporter.

“This model has clearly been in the interests of farmer shareholders. But farmer income also flows through regional communities, and Fonterra and the two other co-operatives account for thousands of good dairy manufacturing jobs also, exactly the sorts of jobs we need in regional communities.”

He said Fonterra’s competitors were focussing on the farm gate price because they could not match it and it was in the interests of private investors to reduce the farm gate price to increase profits to their non farming shareholders.

“It is quite simple – either we back New Zealand farmers, workers and regional communities, or we usher in changes to dairy policy which will see profits concentrated among an elite – often overseas.”

James Ritchie said milk was just one item of rapidly rising food prices putting pressure on low income families, and there was value in debating whether a domestic milk price should be set for New Zealand consumers.

“New Zealanders support the dairy industry through infrastructure development, investment in biosecurity, trade policy and environmental protection measures. We believe this support deserves a price discount,” he said.

Ends.

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