A New Zealand dairy farmer says "someone is making a big margin" after highlighting the gap between what farmers receive and retail prices, as a processing plant closure puts pressure on the industry supply chain.
The farmer pointed to receiving 60 cents for a product that sells for $5.79 at retail - a margin that raises questions about who's capturing value in New Zealand's crucial dairy industry.
Dairy is New Zealand's biggest export earner
Mate, this matters. Dairy exports bring in roughly $20 billion annually for New Zealand. The industry employs tens of thousands of people across farming, processing, transport, and support services. It's the economic backbone of rural New Zealand.
But increasingly, the question is: who actually benefits from that $20 billion?
Farmers are getting squeezed. Input costs - feed, fertilizer, fuel, compliance - have surged over the past five years. Meanwhile, farmgate prices haven't kept pace. Many dairy farmers are operating on razor-thin margins or going backwards.
At the same time, consumers are paying more. A block of cheese that cost $8 a few years ago now costs $12 or more. Milk prices have climbed steadily. Butter is expensive enough that people notice when it's on sale.
If farmers aren't getting the money, and consumers are paying more, where's the margin going?
The processors and retailers
New Zealand's dairy industry is dominated by Fonterra, the farmer-owned cooperative that processes about 80% of the country's milk. In theory, as a cooperative, Fonterra's profits flow back to farmer-shareholders.
In practice, it's more complicated. Fonterra has massive operating costs, debt from past international expansion attempts, and ongoing investment requirements. The returns to farmers are determined by complex formulas based on global commodity prices, currency movements, and Fonterra's own operational performance.
