NEW ZEALAND – Tracking Milk Prices In The CPI – April 11, 2011

NEW ZEALAND – Tracking milk prices in the Consumer Price Index (CPI) looks at retail milk prices from the 1890s to February 2011.

In the 1890s, a quart of milk (equivalent to 1.137 litres) retailed for just over three pence on average (which is under 3 cents in decimal currency terms). By 1915, the average price of a quart had risen to about four pence, and then by June 1950 the price had doubled to eight pence.

In 1956, the bottle size tracked in the CPI changed from a quart to a pint. At the time of the change, the quart average price was about 9.2 pence, and the pint average price was about 4.6 pence. The pint average price changed very little for the next 11 years until 1967, when decimal currency was introduced. From July 1967, milk sold for four cents a pint, which was about three per cent higher than the pre-decimal currency average price of 4.64 pence per pint. Four cents a pint in July 1967 is equivalent to 65 cents in February 2011 (or $2.29 for 2 litres), after allowing for general food price inflation.

Prices peak in 2008 and then again in 2011

When the CPI review was implemented in July 2006, the sample of retail outlets and the relative importance of supermarkets against convenience stores were once again updated. In addition, a new ‘geometric’ way of averaging prices within regions was introduced. These changes caused another discontinuity, with the new sample’s average price of $3.05 for June 2006 being slightly lower than the old sample’s $3.13 (based on the cheapest available brand for standard homogenised (blue top) milk in each retail outlet at the time of price collection).

The average price fell to $2.66 in September 2006 from $3.03 in August 2006. The average price fell further, to $2.60 in June 2007, before a rise over the following 15 months to $3.37 in September 2008, reflecting a jump in world dairy prices.

Prices then drifted down to $3.16 during the period from September 2008 to November 2009 as world dairy prices fell from their peaks, before turning around and rising again to their highest level of $3.68 by February 2011. The price in February 2011 was 9.5 per cent higher than a year earlier, and 42 per cent higher than in June 2007.

Although the February 2011 average price is the highest recorded in ‘nominal’ terms, in ‘real’ terms prices have at times been higher in the past. For example, the average price of $2.37 in January 1994 is equivalent to $3.78 in February 2011, and the average price of $3.20 in January 2002 is equivalent to $4.18 in February 2011, after allowing for food price inflation.

Statistics NZ collects milk prices each month for the food price index and the CPI from about 125 outlets in 15 towns and cities around the country. About 75 are supermarkets, about 25 are service stations, and about 25 are dairies, grocers, or superettes.

In February 2011, prices ranged from $2.90 to nearly $6.00, with one in two prices being between $3.50 and $3.75.

If consumers had shopped around, they would have found the cheapest milk at dairies or service stations, but they may also have had to pay relatively high prices. Nine of the 10 cheapest prices (many of which were based on discounted prices for two containers) were at dairies, grocers, superettes, or service stations, while the remaining one was at a supermarket. However, seven prices were over $5.00, and these were at dairies, grocers, superettes, or service stations.

Five in 10 dairy, grocer, and superette prices were below the overall average of $3.68, compared with two in 10 service station prices. However, most supermarket prices were under $4.00, and eight in 10 were below the overall average of $3.68.

Information TheCattleSite News Desk

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