File photo. Photo: 123rf.com
Supermarkets aren't moving fast enough to lower the price on dairy products for consumers when there is a drop in cost, says the Federated Farms dairy chair.
Latest figures out on Thursday had food prices shooting up 4.6 percent from last year.
The price of a block of butter is now 120 percent higher than it was 10 years ago, and increases in dairy prices in general helped pull up food prices in June, Stats NZ said.
Milk was up 14.3 percent for the year, to $4.57 for two litres, butter was up 46.5 percent to $8.60 for a 500g block, and cheese was up 30 percent to $13.04 for a 1kg block.
Federated Farmers dairy chair Karl Dean said while the market always fluctuated, supermarkets could move quicker to lower their prices when costs do go down.
"Most farms have to buy butter themselves, they can't make it on the farm, we feel the pain as well," he told Morning Report.
"The big thing is prices do fluctuate all the time but when the prices drop back down, how quickly are those passed on to consumers?
"We've all seen it before ... it seems to take a very long time for dairy products in the supermarket to drop in price, where it should, in my view, be a little bit faster, if those companies can wrangle some deals with suppliers."
Dean said export prices continue to drive the cost of dairy, as well as the wholefoods trend, which was a direct correlation.
"The one that consumers aren't going to want to hear is because they've heard it so much already is the global exporting prices is at an all-time high," he said.
"It does seem to be that the global demand for butter at the moment just seems to be a new trend and global production hasn't ramped up as a result yet."
The commodity price for butter is double what it was 10 years ago, he said.
He said as a result, farmers are at a record-farm gate milk price this year, which has largely been led by the likes of butter and cheese.
But the main export of New Zealand, whole milk powders and skim milk powders, were not at a record-high level, he said.
"We actually have a very different pricing mix to what we've seen a decade ago," he said.
Finance Minister Nicola Willis recently asked for a please explain from Fonterra - which pinned the pricing on global prices.
But Dean said there is not much Fonterra could do.
"There is probably very little Fonterra can do, they are obviously looking at selling their consumer brand business of Australasia and that'll mean there is no longer any form of control in that local market," he said.
"To put in it in perspective, there hasn't been any new players onto the domestic market in the last 10 years in terms of butter, other than the likes of Westgold - Westland have got their very premium product.
"But there are another one or two manufacturers of butter in New Zealand and they don't supply to the domestic market at all, so that doesn't help competition."
What Morning Report listeners think:
Many Morning Report listeners have expressed their thoughts on the topic; here's just a few messages sent in.
"Butter price: anyone still wasting money buying food and beverages from cafés is, by definition, not suffering from dairy prices. Plenty of disposable income around apparently." - David, Dunedin
"Why is petrol so cheap in oil producing countries? Would the same logic not apply to butter in NZ?" - Owen
"When butter was at $6 a block in the supermarket, the supermarkets were earning approx. $3 per block. At $11 per block, the supermarkets are taking $5.50! The supermarkets applying a straight % mark-up is part of the problem and the lack of supermarket competition is a large part of the issue." - Name withheld
"The cost to get butter to market on the other side of the world must be significantly higher than getting it to stores in NZ. Why is that not reflected in the NZ price?" - Name withheld
"Went dairy-free over five years ago so don't know what the cost issue is all about. However, the biggest issue with dairy prices increasing is less dairy eaten in NZ and more pollution from the dairy industry in NZ." - Name withheld
"I've definitely cut back on butter and cheese use. I also take home any remaining butter from café scones. Perfect for my toast."- Sandra, Porirua
"Why is it that NZ butter and cheese is so much cheaper in Australia?" - Jacqui
"Contrary to popular belief it's possible to eat well without dairy." - Name withheld
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