The government has opened consultation on its proposed response to reviews of Fonterra’s farm gate milk price setting and the Raw Milk Regulations.
Primary Industries Minister David Carter says comprehensive work by the Ministry of Agriculture and Forestry, with input from economic, regulatory and legal experts, has resulted in a set of preferred options for amendments to the Dairy Industry Restructuring Act (DIRA) and the Raw Milk Regulations.
The review recommends:
- embedding Fonterra’s current milk price governance arrangements in legislation
- requiring Fonterra to publicly disclose information about its milk price setting
- introducing an annual milk price monitoring regime to be undertaken by the Commerce Commission
The preferred option for the revised Raw Milk Regulations recommends:
- a three-season limit for independent processors who source raw milk directly from farmer
- an increase in the total quantity of milk available under the Raw Milk Regulations to approximately 5% of Fonterra’s milk supply, as currently allowed for in the DIRA
- a range of maximum quantity limits for independent processors accessing milk under the Raw Milk Regulations in different months to reflect the seasonal nature of milk production.
Fonterra is far from happy and says foreign-owned processors will benefit at the expense of farmers and domestic consumers:
Fonterra Chairman Sir Henry van der Heyden said the proposed changes to Raw Milk Regulations won’t work and will have New Zealanders subsidising increasingly foreign-owned dairy processors that don’t sell milk in New Zealand and who send their products and profits offshore.
“The Government’s move to require more raw milk to be handed over to increasingly foreign-owned dairy companies operating in New Zealand will impose nearly $200 million of additional costs over the next three years alone and work against our efforts to reduce the price of milk in New Zealand,” Sir Henry says.
“That’s because not one of the six other major dairy processors supplies milk to New Zealanders,” he says.
“The proposed changes will see windfall profits head straight into the pockets of increasingly foreign-owned dairy co mpanies and will hinder, rather than help, New Zealanders get access to affordable milk.”
The DIRA was supposed to protect domestic consumers and competitors from Fonterra’s dominant position. It wasn’t supposed to protect foreign competitors.