Monday, May 31, 2010

One Class for Manufacturing Milk?

Someone asked about one class for all manufacturing milk. Superficially, this may seem to be just fine, at least to those supporting S1645.

However, the problem we face with generating a new pricing system is the need for input from many more a sectors.

The problem with the one class approach can easily be understood by thinking of one price for all female bovines. If the price is adequate for a newly fresh cow, who would pay the same for a heifer calf?

Obviously, the whole pricing structure would break down with a one price system for either cows or milk.

Fonterra, at the end of the milk season, prorates the value of each product it has sold and then divvies up the proceeds. Fonterra is going to sell everything for waht ever it will bring.

1 comment:

  1. I respectfully disagree that one class manufacturing pricing system would break down the structure of the whole system...change it certainly.

    I fail to see what difference it makes what I get for manufacturing milk if I have an equity stake in the balancing operation?