Cheaper milk on its way
NIKO KLOETEN
Last updated 13:47, December 11 2014
The price of milk is about to get cheaper, with a major supermarket chain planning to drop prices following a cut in Fonterra's payout forecast.
The dairy giant has cut its forecast milk price to farmers for this season from $5.30/kg to $4.70/kg after a continuation of the slump that has seen dairy prices drop by 50 per cent since February.
But although the reduced payout will make it a tough year for farmers, it could benefit consumers with reductions in the price of milk and other dairy products.
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Foodstuffs spokeswoman Antoinette Laird said Foodstuffs recently received a small wholesale milk price change from its suppliers which it passed on to customers as a milk price reduction in November.
She said the price of a bottle of milk tended to lag behind Fonterra forecast announcements by up to three months.
"Because of this we are expecting the price we pay for milk to drop in the first quarter of 2015. Our plan is to pass all savings we receive onto our customers as soon as we receive them from our suppliers."
Foodstuffs buys milk from Fonterra and Goodman Fielder.
Laird said Foodstuffs, which owns Pak'nSave and New World, said Foodstuffs brands had dropped the average price of cheese and butter in recent months.
"We are now promoting butter regularly under $3 and 1kg blocks of cheese for under $8, both of which represent great deals for customers. These items were costing at retail as much as $3.49 (butter) and $8.99 (cheese) only 2 months ago, so these reductions really do equate real savings on every day product to consumers."
A Countdown spokeswoman said it was too early to tell what effect the lower dairy payout would have on supermarket milk prices.
"At this stage we haven't heard from our suppliers about what flow-on effects there may be for customers at the supermarket.
"We know that customers want to see lower prices on milk and we'll of course be talking with suppliers about achieving that, as we do with every product on our shelves."
ASB chief economist Nick Tuffley said the cost of the milk itself made up only a small part of what customers paid at supermarkets.
"There's also the cost of transport, packaging, processing and distribution before it ends up on the shelf."
Tuffley said the price consumers pay for milk tends to rise and fall less sharply than the underlying commodity price.
"In the past we've seen when there's a big lift in dairy prices it doesn't get fully reflected in milk prices. On the way up and down the retail prices are a bit smoother."
Translated from dollars per kg, a farmgate milk price of $4.70 is equivalent to about 41c a litre, the lowest since 2009.
Last year's record $8.40 payout was about 78c a litre.
The average since 2006 has been about 51c.
- Stuff.co.nz
