GST will add five cents to bottle of milk

Press, 12 August 1986, Page 8

GST will add five cents to bottle of milk

The price of a bottle of milk will increase 5c in October, while the price paid to farmers for their milk will drop. The acting Minister of Agriculture, Mr Colman, announced the price changes yesterday.

He said the rise in the price of milk would take effect on October 1, and would mainly be the effect of GST. A 600 ml bottle of milk would then cost 45c.

The town-milk producer price for the 1986-87 season would be set at 300 cents a kilogram of milkfat, down from 400 c a kilogram. The season will begin in September. The average seasonal town-milk producer price would be 22c a litre of whole milk, down from 27c a litre, said Mr Colman.

If set under the traditional formula, the price would have dropped sharply and led to “serious supply problems,” he said.

Dairy farmers had been expecting the lower price for their product, but some / representatives were concerned at the increase in the price to the consumer. The chairman of the dairy section of Federated

Farmers, Mr Bruce Tolich, said the price increase to consumers would mean a drop in demand.

“That always happens when the price Increases. Any drop in demand is going to concern dairy farmers,” he said. The lower payments to farmers meant they would have to "struggle like hell to manage” this season, said Mr Tolich. Mr Colman said there had been several increases in production, processing, and delivery costs since the removal of the consumer subsidy in 1985. The drop in the town-milk producer price would offset a significant part of those costs, and restrict the price increase to consumers mainly to the effects of GST.

The general manager of the Milk Board, Mr Hamish Tumball, said the board had continued to pay a subsidy on townmilk by borrowing from banks when the Government withdrew subsidies. The board now had a $l5 million debt which the Government wanted it to pay off.

“The Government actually wants us to build up a surplus so we will not have to borrow to pay the

higher prices to producers during the winter,” said Mr Tumball.

The president of the Town Milk Producers’ Federation, Mr B. F. Kimpton, said farmers would be disappointed to see any drop in producer price, but it could have dropped to 225 c a kilogram under the usual formula.

The new price would make it impossible for farmers to carry on without making changes and economies. He said farmers would have to cut variable costs, such as off-farm grazing, fertiliser, artificial breeding, and herd testing, by 50 per cent to break: even.

“It will call on all their farm management skills. It is going to be a challenge, but one that the average town-milk supplier will be able to rise to,” said Mr Kimpton. An announcement by Mr Colman that special production allowances would be paid to allow for regional differences was welcomed by Mr Kimpton.

“It has always been recognised that extra payments to the South Island were needed because of the climatic conditions,” he said.