Federated Farmers Accuses Retailers of Lagging on Passing Savings to Consumers.
The Federated Farmers dairy chair, Karl Dean, has openly criticized New Zealand’s supermarkets for their slow response in lowering dairy product prices for consumers, even when costs for producers decline. This strong accusation comes as recent figures reveal that overall food prices have surged by 4.6% from the previous year. Dean argues that while market fluctuations are inherent to the dairy industry, retailers possess the ability to adjust their prices much more swiftly when their input costs fall.
Dean highlighted a significant disparity in the speed of price adjustments, noting a common observation that 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.” He suggested that supermarkets could accelerate this process by “wrangling some deals with suppliers.” This sentiment reflects a growing frustration among dairy farmers and industry stakeholders regarding the transparency and fairness of dairy supply chain pricing.
A key factor driving the cost of dairy in New Zealand, according to Dean, continues to be global export prices, alongside the increasing trend towards wholefoods. He pointed out that “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.” Specifically, butter prices are currently 120% higher than they were a decade ago, with the commodity price for butter now double that of 10 years prior, underscoring strong global dairy demand.
Despite these high export prices, Dean clarified that New Zealand’s main export products – whole milk powders and skim milk powders – are not at record-high levels, indicating a “very different pricing mix” compared to a decade ago. While farmers are experiencing record farmgate milk prices this year, largely driven by the strong performance of butter and cheese, the slow pass-through of any cost reductions to consumers by supermarkets remains a contentious issue in dairy economics.
Finance Minister Nicola Willis recently sought an explanation from Fonterra regarding these pricing dynamics, to which Fonterra reportedly attributed the high prices to global market rates. However, Dean argued that there is “very little Fonterra can do,” especially given its focus on potentially selling its Australasian consumer brand business. This move, if it proceeds, would remove a significant form of control in the local market, potentially further impacting domestic dairy competition and consumer pricing.
Source: RNZ: Supermarkets aren’t moving fast enough to lower dairy prices, says Federated Farmers dairy chair
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