2011-02-19

Farmers not creaming milk, lamb or beef prices

New Zealand’s farmers are not exploiting high local food prices, with farmers receiving less than 30 percent of the retail value.

“The current high milk prices has many thinking that farmers must be creaming it but we’re not,” says Lachlan McKenzie, Federated Farmers Dairy chairperson.

“If you look at a litre of milk, the farmer’s share expressed as revenue, is about 300 mils.

“Most dairy farmers, myself included, got less than $0.60 for a litre of milk last season. From these 60 cents, we had to pay all the costs of production including, wages, vets, tax as well as paying the mortgage.

“A small number of dairy farmers are paid more for producing "winter milk". There are a lot of extra costs running a dairy farm through winter but even they get only a small premium on a per litre equivalent.

“So if someone’s making a mint from milk, I’d suggest looking a lot closer at retail margins.

“Even with lamb, the current season forecast is around $95 for a 17.5 kg lamb. That’s around $5.43 a kilogram so the farmers share is a lot less than what people pay in a supermarket.

“We found a similar picture in 2008 with the New Zealand Institute of Economic Research (NZIER) prepared report, The farmers’ share.

“It’s time for the Government to look a lot wider than just the retail price of milk. There needs to be a true unbundling of the retail margins involving our primary produce.

“Our farm income and expenses are also completely transparent. Anyone can read this in MAF’s Pastoral model chapters available from its website.

“This data, as well as The Situation and Outlook for New Zealand Agriculture and Forestry, shows how farmers work hard to produce outstanding food and fibre, but are only left with a small portion of the retail price.

“It would also be great if the Government put the same pressure on the costs it and local government impose. Some more discipline in its spending goes a long way.

“These add to non-tradable inflation and this erodes the already small margin of what we make from producing fantastic food and fibre,” Mr McKenzie concluded.

The 2008 NZIER report ‘The farmers’ share’, can be downloaded by clicking here.

MAF Pastoral model chapters can be viewed by clicking here.

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