18 Feb 2011

Fonterra freezes NZ milk price

7:32 pm on 18 February 2011

Fonterra is freezing its wholesale domestic milk prices for the rest of 2011.

Its chief executive officer, Andrew Ferrier, says international milk prices have risen steadily over recent months, and while these prices are good for food exports and the New Zealand economy, New Zealanders are feeling the effects in their shopping trolley.

He says milk is an important part of the diet in New Zealand and he wants future generations of New Zealanders to grow up enjoying it every day.

The announcement came late on Friday afternoon, after Agriculture Minister David Carter said he was seeking advice from his officials about the cost of milk.

The deal will only affect local sales, not the 95% of Fonterra's production that sells offshore.

The manager of Fonterra's consumer products division told Radio New Zealand he's freezing domestic milk prices in a bid to stop losing customers.

Fonterra Brands New Zealand managing director, Peter McClure, says milk sales have tapered off by about 1% in the past few months.

He says it is in the company's best interests long-term to keep people buying milk, and he's not ruling out continuing the price freeze next year.

Mr McClure is urging retailers to support the price freeze.

MAF looking at price

The minister's move followed complaints milk was more expensive than soft drinks, despite its healthier content.

His office said the Ministry of Agriculture and Forestry would look at the current milk market, determine what was driving the increases and make sure a competitive domestic market was working properly.

Fonterra raised wholesale prices 1.4% in January but could have pushed them higher if costs had not been absorbed by the company. Fonterra says world dairy prices have gone up go up by more than 26% in three months.

International prices are forecast to rise by 30 cents per kg of milk solids this year.