The average price for products on Fonterra's bi-weekly international auction increased yesterday for the sixth consecutive time - up 3.9% - with the prices for raw dairy ingredients now up 23.8% since December.
In shops, butter prices have risen 40%, cheese 17%, and milk almost 9% in the past year.
But Taieri dairy farmer Ads Bekkers contacted the Otago Daily Times yesterday to say rising costs were eroding any benefits to farmers from higher milk prices.
Mr Bekkers said the domestic market had to compete with international prices, which took more than 95% of New Zealand's dairy production.
If the international market faltered, Mr Bekkers said the price of milk products, and therefore milk, would likewise fall.
Dairy production costs were also rising: some fertilisers cost four times last year's price.
"Farmers are not creaming it. If the payout has a five [$5 a kg of milk solids] in front of it, farmers will be going broke, a six and they will break even and a seven, they will make some money. The hourly rate is not great."
Rising domestic dairy prices have prompted community leaders to warn that fresh milk is out of reach for some people, with a 2-litre container selling for between $3.65 and $5.40.
Fonterra chief executive Andrew Ferrier warned this week that high milk prices were the new "normal" as emerging markets drove up demand and price.
Fonterra Brands managing director Peter McClure said his company, a Fonterra subsidiary, was absorbing rising dairy prices which pushed the cost of raw milk this year up 45%, butter up 153% and cheese 46%.
Mr McClure said even though his company was wholly owned by Fonterra, it had to pay the same price as any other company for milk.
He said other commodities such as flour, oil and meat were all rising in price because of increasing demand.
"The $4.50 you pay for a 2-litre [container] of milk is still good value when you consider the nutritional values you get."
It was the same price as a cup of coffee, he added.
A Goodman Fielder spokesman said Fonterra set the raw milk price based on international prices but, ultimately, supermarkets determined the retail price.
A supermarket war in Australia has pushed the price of milk down to $1.30 a litre for some in-house brands.
NZX Agrifax dairy analyst Susan Kilsby said dairy prices had been rising quite rapidly.
"We've seen that not just in dairy commodities, but in all commodities generally."
New Zealand consumers could expect to see increases in the price of dairy products, with about a three-to-six-month delay between changes in global commodity prices and those in supermarkets, she said.
- Additional reporting The New Zealand Herald.
