Fonterra is not doing itself or its farmers any long-term favours by offering cheaper milk prices to NZ consumers
Fonterra’s recent announcement that it intends to reduce local milk prices may have been welcomed by various consumer groups and many others – including self-serving politicians.
While the intention may be good; the move is likely to cause long-term problems for the dairy co-operative—as its dairy farmer owners’ end up not so much crying over spilt milk – but split milk prices!
The move looks more like a cheap (which may actually turn out to be costly for farmers) public relations stunt to appease these critics – rather than the reality of the market. The dairy co-operative now risks feeding the myth – propagated by these same critics – that farm products ought to be cheaper in their country of origin.
That is a fallacy that neither the dairy industry, the wider primary sector nor the New Zealand economy as a whole can afford to have.
Fonterra is the leading international supplier of premium dairy products around the world. The fact is that fresh, farmed milk now costs more than manufactured drinks. Meanwhile, demand for dairy products is rising with prosperity in places such as China and other international markets.
The New Zealand market is just one of many that Fonterra supplies its products to. It is hypocritical and an unfair expectation of New Zealand’s dairy farmers that they should have to subsidise local buyers of dairy products.
New Zealand consumers do not expect cheaper or subsidised products from the plethora of international banks, insurance and oil companies that are based in this country. Nor should they expect the same from one of the few, truly New Zealand-based successful international trading companies.
All local consumers should expect is a truly competitive industry at all stages from the farm to the final consumer. So far, all the inquiries, investigations and independent reports have found this to be the case.