Rethink on milk price inquiry

Milk costs too much, critics say. Photo / Thinkstock

The Commerce Commission is considering an inquiry into whether the price of milk should be regulated.

Consumer advocates applauded the commission's change of mind, after its chairman, Dr Mark Berry, last week told MPs an investigation was not necessary.

Consumer NZ chief executive Sue Chetwin said New Zealanders paid too much for milk and deserved to know how prices were set.

"At the moment, we basically have a monopoly supplier of milk and two supermarkets selling it," she said. "I think an inquiry could be a really good thing for consumers."

Milk prices have risen about 10 per cent in a year. Two litres of Anchor dark blue were $4.80 last night at Countdown on Quay St in downtown Auckland. Homebrand's dark blue was $3.60 for the same quantity.

Federated Farmers calculates that producers get about $1.60 for two litres. The rest goes to the dairy distributor, the seller and to the Government in GST.

Fonterra and Goodman Fielder are the main distributors of dairy products in New Zealand and have a roughly equal shares of the market, according to a report from the Ministry of Agriculture and Forestry.

Fonterra's brands include Anchor, Mainland and TipTop. Goodman Fielder has Meadow Fresh, Tararua and Chesdale.

Fonterra collects 89 per cent of the 16 billion litres of milk produced a year in New Zealand.

It exports more than 95 per cent of this milk, uses some to make its own products and sells the remainderto Goodman Fielder and other dairy producers.

Green MP Sue Kedgley said Fonterra's position amounted to "a virtual monopoly", and an investigation into dairy prices was essential.

Fonterra's general counsel, David Matthews, said an inquiry was not needed.

"We are of the firm view that there is competition in the market," he said.

But Federated Farmers welcomed the announcement and said an investigation would "help end the speculation over milk prices".

On February 18, Fonterra announced that it would freeze wholesale domestic milk prices for the rest of the year. The supermarket chains soon followed with their own freezes.

A Government report this month said domestic milk prices were set by the international market.