25 September 2011

3 minute read

Compare two litres of milk and a similar bottle of cola in front of a farm and you'll get a look of disbelief.

The global soft drinks industry is worth a staggering $555 billion for products that do not seem expensive to make. The base ingredient is water with flavourings, food colour, sugar and of course, carbon dioxide. Some of the mark ups I’ve read about are incredible, as is the cup of sugar in two litres of cola.

By contrast, milk is both a food and a drink. It’s chock full of nutrients like vitamin A and B, calcium, carbohydrates, phosphorous, magnesium, protein, zinc and riboflavin. Milk is the result of a lot of hard work, not just by farmers. The best milk comes from well looked after cows living on our grass based farming system.

While I acknowledge there is cynicism in some quarters, dairy farmers are reducing their environmental impact. Fencing waterways and building effluent management systems, feed pads and even wintering stock off-farm adds up. Some are even engaged in rainwater harvesting. All of this investment is paying dividends; compliance is improving from Otago to the Waikato.

When you look at a bottle of milk, farmers are only part of the story. What comes from cows needs to be quickly collected, processed, packaged and delivered into supermarkets and dairies. There are a lot of people outside the farm gate who work hard to get this fragile time limited product to you.

Time is not only money, its quality and quality milk is in global demand. Dairy farmers would reproach me for not pointing out that the farmer’s share in a two-litre bottle of milk is roughly around $1.30. What’s more, the retail price of milk fell markedly in 2008/09 when global commodities slumped. Farmers aren’t looking for sympathy, just an understanding that farm incomes are directly tied to international prices, whether that’s up or down.

The most recent inflationary spike in food came not from farmers, but from grocery items and ‘non-alcoholic beverages’ like water. In June, Statistics NZ had two-litres of milk steady at $3.68 while a 750ml bottle of water increased 5.8 percent to $2.19. Given the media and political attention, Coles’ promotional milk pricing has hit a nerve on both sides of the Tasman.

Milk there, just like fuel dockets here, is used as a ‘loss leader’. An Australian Senate inquiry noted that Coles had slashed its home brand milk prices by a full third, so are we paying too much? Australian statistics for March puts the average retail milk price for two litres at between NZ$4.28 in Adelaide to NZ$5.84 in Darwin. To create a fair comparison, that includes exchange rate differences and of course, the GST our milk attracts.

As I don’t have a house cow I buy my milk just like everyone else. Milk remains great nutritional value for money and there are good milk prices by shopping around. Supermarkets may not be the best place to buy from if Timaru’s Corner Convenience Store has been selling two litres of Dairy Dale for $3.20 and the Harris Road Superette and Lotto in Mt Wellington for $2.90. If we reward dairies like these with increased business then retail milk prices may start falling elsewhere.