Minister for Primary Industries, Nathan Guy, is seeking feedback on options to amend the Dairy Industry Restructuring Act 2001 (DIRA) and its regulations.
The document is in response to the Commerce Commission’s report on the state of competition in the New Zealand dairy industry, which was released on 1 March 2016. By law the Minister is required to respond to this report within 90 days of receiving it. . .
Among suggested changes are:
• Amending the Dairy Industry Restructuring Act (Raw Milk) Regulations 2012 so that Fonterra no longer needs to sell milk at a regulated price to large, export-focused processors, and the volumes of regulated milk available to all other processors are gradually reduced.
At the moment, Fonterra is required to sell to competitors at a regulated price, even though they are big enough to stand on their own feet.
• Amending the open entry provisions so that Fonterra no longer has to collect milk from new dairy conversions. . .
This requirement has forced Fonterra to direct investment to more processing when it’s not necessarily the best way to maximise returns for farmers.
It also led to dairy conversions in places where no-one would have contemplated dairying. It has imposed greater costs on Fonterra which has no choice but to collect the milk and some also argue it’s led to farms converted in areas where the environment isn’t suited to dairying.
If legislation is the answer to business success then it’s almost always because the wrong question has been asked.
We can’t turn back the clock. Fonterra was formed and the DIRA passed to ensure it didn’t have an unfair advantage.
However, the clause requiring Fonterra to sell milk at a regulated price to its competitors is no longer needed and requiring it to pick up all milk it’s offered has proven to be a mistake.