I see I see, Fonterra and supermarkets have decided to freeze the price of milk.
Now if that is what they want to do, I’m sure they have good reason. However, lets all remember one thing: if Fonterra decides to sell milk in NZ more cheaply than it does overseas it is taking a litre of milk that would have been more highly valued by a non-New Zealander and giving it to a New Zealander.
There is no free lunch. If we were to force Fonterra to do this transfer we are not only transferring funds from farmers to domestic consumers – we are taking away the value that would have been created when Fonterra sold the milk to someone who genuinely values it more highly than the domestic consumer does.
Now Fonterra appears to have done this voluntarily (although who knows what pressure there was in the background), so I am sure there is some sort of … reason. Still, lets not take this as a indication that price freezes, or closing off from international markets, is a good thing.