Fonterra fronted the parliamentary milk price inquiry this week and defended the price of milk in New Zealand saying there are bargains to be had if consumers shop around.

According to media reports, Fonterra’s Brands managing director Peter McClure told the inquiry that not only is the milk here as cheap as anywhere in the world but that the way it sets its milk price is transparent and robust.

However, dairy industry advisor Peter Fraser told Country 99TV this week that whether the price of milk is too high or not misses the point.

“I think the crunch point here is really one around transparency, and that the issue is not so much whether Fonterra’s price is a little bit too high or conversely a little bit too low, but the point is nobody but Fonterra actually knows.  

"For example you go and ask MAF, is the price too high? They don’t know, they tended advice earlier in the year on exactly that basis they don’t know.

"You go and ask the Commerce Commission, they’re talking to MAF, they don’t know either.

"So my own personal view is that in a world  that is post-Lehmans, post leaky buildings, post all of these areas where we’ve had really a lot of faith in industry self regulation –  I’m really very sceptical.”

And he says the huge spread in price on a basic commodity shows the market isn’t working.

“The arguments raised that you can get a 2Litre bottle of milk at say $3 or you can get it at $5, why don’t you just get the $3 one.

"What it misses is that’s actually a $2 spread over a $3 base. That’s an enormous spread.

"Now if you have any commodity market that exhibits enormous spreads that are actually entrenched over time it suggests there’s a lack of competition or a lack or workable competition in the market.”

Last week Federated Farmers told the milk price inquiry Kiwis could drive to a dairy in South Auckland to buy cheap milk.

But Mr Fraser says if there was an efficient milk market, New Zealanders wouldn’t need to drive for hours to get cheap milk because the commodity would be similarly priced, like it is the petrol industry. 

In other dairy industry news Tatua announced its highest ever payout of $8.10kg/ms on the back of the stellar performance of milk protein caseinates and anhydrous milk fat markets.

Earlier this week Westland dairy cooperative announced its payout of $7.80 per kg/ms just lower than Fonterra’s $7.90.