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Comments on: Fonterra auction to blame for low dairy prices?? http://www.tvhe.co.nz/2008/11/26/fonterra-auction-to-blame-for-low-dairy-prices/ The Visible Hand in Economics Thu, 27 Nov 2008 13:01:09 +0000 hourly 1 https://wordpress.org/?v=6.9.4 By: Thoughts on the price of milk « The visible hand in economics http://www.tvhe.co.nz/2008/11/26/fonterra-auction-to-blame-for-low-dairy-prices/#comment-3635 Thu, 27 Nov 2008 13:01:09 +0000 http://tvhe.wordpress.com/?p=2091#comment-3635 […] Comment! This is from an email exchange between Agnitio and myself on why dairy prices rose, following his post on Fonterra’s auctions: […]

]]> By: Matt Nolan http://www.tvhe.co.nz/2008/11/26/fonterra-auction-to-blame-for-low-dairy-prices/#comment-3634 Wed, 26 Nov 2008 21:18:23 +0000 http://tvhe.wordpress.com/?p=2091#comment-3634 “Never thought Iā€™d have Fonterra to thank for more transparent dairy prices but there you go.”

šŸ˜€

]]> By: Tono and the Finance Company http://www.tvhe.co.nz/2008/11/26/fonterra-auction-to-blame-for-low-dairy-prices/#comment-3633 Wed, 26 Nov 2008 11:33:55 +0000 http://tvhe.wordpress.com/?p=2091#comment-3633 Never thought I’d have Fonterra to thank for more transparent dairy prices but there you go.

]]> By: Matt Nolan http://www.tvhe.co.nz/2008/11/26/fonterra-auction-to-blame-for-low-dairy-prices/#comment-3632 Wed, 26 Nov 2008 05:03:47 +0000 http://tvhe.wordpress.com/?p=2091#comment-3632 “Same old Aussies, always cheating.”

Damn right, just like the cricket, the soccer, and the car market šŸ˜‰

]]> By: auction » Blog Archive » Fonterra auction to blame for low dairy prices?? Ā« The visible … http://www.tvhe.co.nz/2008/11/26/fonterra-auction-to-blame-for-low-dairy-prices/#comment-3631 Wed, 26 Nov 2008 04:11:12 +0000 http://tvhe.wordpress.com/?p=2091#comment-3631 […] Fonterra auction to blame for low dairy prices?? Ā« The visible … click here here […]

]]> By: goonix http://www.tvhe.co.nz/2008/11/26/fonterra-auction-to-blame-for-low-dairy-prices/#comment-3630 Wed, 26 Nov 2008 03:34:49 +0000 http://tvhe.wordpress.com/?p=2091#comment-3630 Same old Aussies, always cheating.

]]> By: Matt Nolan http://www.tvhe.co.nz/2008/11/26/fonterra-auction-to-blame-for-low-dairy-prices/#comment-3629 Wed, 26 Nov 2008 03:11:53 +0000 http://tvhe.wordpress.com/?p=2091#comment-3629 “On the same note conusmer surplus will be increased if dairy prices fall and that is passed through to local consumers.”

I don’t think the Australian dairy producers will care too much šŸ™‚

]]> By: agnitio http://www.tvhe.co.nz/2008/11/26/fonterra-auction-to-blame-for-low-dairy-prices/#comment-3628 Wed, 26 Nov 2008 02:37:52 +0000 http://tvhe.wordpress.com/?p=2091#comment-3628 On the same note conusmer surplus will be increased if dairy prices fall and that is passed through to local consumers.

That has a positive externlity for me in that my office manager will stop whinging about it being Fonterra’s fault that cheese is expensive!

]]> By: Matt Nolan http://www.tvhe.co.nz/2008/11/26/fonterra-auction-to-blame-for-low-dairy-prices/#comment-3627 Wed, 26 Nov 2008 02:32:20 +0000 http://tvhe.wordpress.com/?p=2091#comment-3627 I would say the Aussies are muppets – no offense to any Aussies out there of course šŸ˜›

The primary factor behind the collapse in prices are:

1) Drop in demand from Asia after the poisoned milk scandals,
2) A sharp pick up in export supply from the US

The Aussies are forgetting that the demand curve slopes backwards – if the auction price is lower than the price they are currently trying to charge they will be left with excess stock. The Aussies should be praising Fonterra for working to reveal the real market price.

Of course in their defense, I guess demand for milk is inelastic, and New Zealand and Australia are residual claimants (so just receive the market price) – as a result, the more flexible prices are on the downside the lower net profits will be in a case where the price needs to fall, something that would piss them off šŸ™‚

I love first year economics – it gives you all the tools you need to answer these questions šŸ˜€

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