Milk producers agree to cut prices up to 20%
Milk producers agree to cut prices up to 20%
JAKARTA (JP): Milk producers agreed yesterday to reduce
factory prices of their products between 10 percent and 20
percent in response to a mounting outcry over the good's soaring
cost.
The chairman of Milk Processing Industries (IPS), Sabama, said
yesterday producers would cut prices of powdered milk for adult
and infants by 20 percent, and of baby formula milk by 10
percent.
"Milk producers under the IPS reached agreement with the
industry and trade minister earlier today (yesterday) that we
ought to take part in relieving the people's burden by lowering
our prices," Sabama said.
Although the price reduction went into effect yesterday, he
said it may not be fully implemented until Wednesday.
The IPS will have to conduct a minimal two-day preparation,
include checking companies' stocks and other technical matters.
Sabama said he hoped the price cut would encourage a
commensurate reduction in retail prices of milk.
The price reduction is based on the latest price of milk, he
said, but he did not divulge either factory prices or average
retail prices of milk.
The association would monitor prices of milk sold by the
distributors and large retailers, he said.
"Supermarkets are the easiest to monitor, and we'll conduct
weekly checks on their highest retail prices."
He said there were more than 400 grocery stores in Jakarta,
but added the association would be unable to closely monitor
small retailers as this would be more costly.
IPS will warn retailers which did not reduce their prices, and
would terminate the distributing license of distributors found
selling milk at rates exceeding the agreed prices, Sabama said.
Although admitting that some distributors had raked in more
profits than others, he said association had urged them and
retailers to guarantee the supply so that there would be no more
panic buying of the food.
The price of milk, much of which is imported, has risen by 100
percent to 300 percent since January, along with a 70 percent
slump in the value of the rupiah to the U.S. dollar.
Local milk producers import most of their dairy milk from New
Zealand, Australia and the United States.
Sabama said the sector would have to slash their production
costs in order to lower their prices.
He said the producers raised their prices at the beginning of
last month at a marginal level to be able to buy dairy milk.
"We were not thinking of making a profit then."
In order to slash their prices, Sabama said the companies
would have to reduce cost of promotions, distribution, variable
expenses and factory and operation overheads.
The director general of trade in the ministry, Ilchaidi Elias,
said yesterday it was possible prices could go lower in the
future.
"As of now, at the rate of the rupiah and the composition of
the production costs, they can only squeeze the prices this
much," Ilchaidi said.
Further reductions might follow, he added, if "... the
economic condition gets better, imports are easier and the rupiah
has stabilized ..." (das)