in: blairtrewin; blairtrewin > 2007-10-08;
| # Posted 2007-10-08 12:33:44 | |
| Eoin: | Indeed they should pass the price on - otherwise how about a blanket ban? |
| # Posted 2007-10-08 14:02:47 | |
| James: | tut tut.... biofuel policy.
Nonetheless, some farmers will do very well out of high grain prices, if they actually got a crop up. |
| # Posted 2007-10-08 16:44:18 | |
| TheInvisibleLog: | Is it the cocoa or the milk component driving the price rise? If it is the cocoa, we should see a rise in th price of a block of chocolate. I suspect it may be the milk price. If so, then yes it is a combination of water shortage in the Murray and bio-fuel policy in the US. Water has risen from $300 per megalitre last year to $900 at present. Normally wheat and hay would substitute, but the US bio-fuel inanity has raised the wheat price from around $250 to $450 a tonne approx. The milk factories have been raising the season price for milk in leaps and bounds to encourage the dairy farmers to keep producing. It is notable that the wineries have not been doing the same for the grape growers. Enjoy those cheap wines while they are in stock. |
| # Posted 2007-10-10 10:11:38 | |
| Shep: | does chocolate not have milk in it ____________? |
| # Posted 2007-10-10 11:48:25 | |
| TheInvisibleLog: | Yes, but the discussion was about chocolate milk rather than milk chocolate. |
| # Posted 2007-10-11 06:08:48 | |
| blairtrewin: | Some back-of-the-envelope calculations suggest that the farmgate price of the ingredients makes up 10% or less of the product price, so I suspect there's a bit of opportunism happening downstream.
It was an eye-opening experience during the Australian Championships carnival in Queensland in 1991 (a severe drought year) to see roadside stalls selling potatoes for 2c/kg, then on returning to Canberra seeing potatoes from the same area selling for 69c/kg. Certainly gave an indication as to how little of what you pay at the shops goes to the producer. |
| # Posted 2007-10-11 15:37:47 | |
| feet: | I'm not sure why you collectively seem to expect the markup over the cost of ingredients not to rise along with the cost of ingredients. If prices rise, so does the markup. Fuel prices have been high for a while too (although not rising much in AUD terms because of the fall of the USD), and that eventually has to get passed through also.) |
| # Posted 2007-10-11 17:04:07 | |
| TheInvisibleLog: | Markups in the Australian fresh food sector are hardly competitive. There is a comfortable duopoly between the two large supermarket chains. There is a constant argument over the size of this market share with the two chains arguing for a figure that includes everything from tobacco sales through to coffee served at cafes and beer at pubs. With this position, they can get their market share down to the low 60%. But if you look at fresh food purchased for kitchens, the figure is in the high 70% I think. This means that markups are not a function of the price of the ingredient, but an assessment of capacity to charge the consumer. The evidence is there in the differential prices charged according to the income prevailing in different communities, and the lower prices available in the few remaining independent outlets who probably cannot source their produce as cheaply as the supermarkets.
Consumer perceptions of drought food shortage have provided a reason to reassess consumer willingness to pay in the past. In the early phases of the drought, prices of some items such as lamb rose based upon claims of increasing market place costs. Yet much of the supply chain was still locked into supply contracts with no increase in price paid to the producers. That situation is now changing with significant shortage of supply looming for a number of commodities. Milk prices to producers have risen in a manner unknown in living memory. But given that the producer component of some fresh food retail prices is less than 20%, a doubling of prices to producers hardly justifies a doubling of the retail price, even accounting for reduced turnover available to support the fixed costs of the business. |
| # Posted 2007-10-12 04:49:54 | |
| Shep: | "Is it the cocoa or the milk component driving the price rise? If it is the cocoa, we should see a rise in th price of a block of chocolate."
so _________, my point was why wont an increase in the price of milk drive up the price of chocolate? |
| # Posted 2007-10-12 08:27:41 | |
| TheInvisibleLog: | Maybe I am a supermarket sceptic, but this is my reasoning.
Dark chocolate has no milk, so no impact from a milk price rise (some brands of Hershes excepted). Milk powder is the largest component of milk chocolate as measured by mass. Possibly the thrid or fourth component in terms of ingredient price. I would expect that the ingredients comprise a relatively small share of the value extracted from my purchase of chocolate. Would expect the main value is in manufacturing, distribution and retail. So any price rise might be minor, and might be hard to detect within the marketing driven price variations. Cadburies seems to go through regular discount cyles of up to a dollar per 250 gm block. I think the attempt to raise the price beyond $4.00 met with some stiff consumer resitance, forcing some to eat Dove just to prove a point, and forcing the regular discount drive. White chocolate isn't chocolate. Dove isn't far behind it. If the price does go up substantially I am happy to eat dark, but not Dove. |
| # Posted 2007-10-12 13:56:09 | |
| James: | I couldn't resist.
"There is a comfortable duopoly between the two large supermarket chains"..This means that markups are not a function of the price of the ingredient, but an assessment of capacity to charge the consumer." This won't necessarily lead to prices at a retail level that aren't competitive if they're selling goods that are pretty much the same. They'll undercut each other, unless of course they collude. "The evidence is there in the differential prices charged according to the income prevailing in different communities," But areas with different incomes typically have different rents. These rents have to be passed on through costs, leading to higher prices in higher income areas. "and the lower prices available in the few remaining independent outlets who probably cannot source their produce as cheaply as the supermarkets. " My experience suggests the few remaining independent outlets tend to have higher prices. But back to Blair's original point (and stretching it a bit further), it would be good if producers actually received the benefits of increased prices. I'm thinking mainly of the exorbitant markups the fairtrade coffee distributors charge, of which only a small proportion actually goes back to the farmers who they say they are trying to support). |
| # Posted 2007-10-12 14:03:39 | |
| Eoin: | "the exorbitant markups the fairtrade coffee distributors charge of which only a small proportion actually goes back to the farmers who they say they are trying to support"
????????????????????????????????????????????????? This escapes me - what about the exorbitant mark ups unfair traders charge or are you selectively targetting "do-gooders"? |
| # Posted 2007-10-13 04:15:03 | |
| James: | are you selectively targetting "do-gooders"?
> Yes. As bad as they are, the oligopsonistic coffee houses at least don't try to put out a misleading message. I've seen different estimates of the percentage of the markup that actually goes back to the fairtrade farmers, from 2% to 10%. It seems that the middle-men (and maybe retailers, too?) are the ones making most of the cash out of fairtrade coffee, not the actual fairtrade farmers. This isn't to say that I think fairtrade products are a bad thing, just that they can be misleading. |
| # Posted 2007-10-13 13:01:30 | |
| TheInvisibleLog: | They face the same issue as the organic industry. There are two sorts of organic farmers. One group is in it for the ideology. One group is in it for the greater share of the retail price. But in Europe where the major chains (Tescos etc) are selling organic produce, the producers are finding their share of the margin is regressing back to the same situation as for conventional food. The ideologues get excited about cracking the mainstream. The pragmatists get disappointed about their decline returns.
Now to James theoretical comments upon the supermarket sector. I will report back upon the prices in the Kangaroo Flat location tomorrow. I have no doubt the independent fruiterer will be significantly cheaper than the nearby Coles outlet. But as James says, the IGA outlets will prbably be expensive. And more likely the quality will be crap. It will be an interesting exercise. Something to do on Sunday when everyone else is off on their long run. As to how the supermarket purchasers compete, the power they hold in the market is expressed in the purchasing of their ingredients. I suggest checking out the concept of the 'holiday' which agents have been known to award growers. Finally, back to Sheps question. I was wrong. The correct answer is 'For the purists there is no milk in chocolate'. I have been set straight by a dedicated chocoholic. |
| # Posted 2007-10-13 16:42:11 | |
| James: | I won't be looking around supermarkets, because someone has already done it for me. Taking price data for Victoria, Walker and Webber found that "An independent store charged the lowest median price in the case of 39.5 per cent of products; a chain store charged the lowest median price for 48.5 per cent of products; and both an independent store and a chain store charged the same lowest median price for 12 per cent of products. Overall then, chain stores are somewhat more likely to charge the lowest price for any given item"
Their discussion of Arnott's Assorted Creams is particularly telling. The end. I shan't comment more. |
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