24 January 2012

Turning off the taps of regulated raw milk

Federated Farmers is calling time on the supply of regulated raw milk to independent processors already receiving it. The sole aim of reform should be to create genuine competitive tension for farmer’s milk.

”Putting a time limit on independent processors, regardless of whether they collect milk from farmers or not, will make them build a milk supply,” says Willy Leferink, Federated Farmers Dairy chairperson.

“While five percent of farmers may think they supply Fonterra, the reality is that their milk gets sent to independent processors. These processors then compete with Fonterra Cooperative Group in the international market.

“The price of raw milk in New Zealand is actually regulated under the Dairy Industry Restructuring Act or DIRA as we know it.

“The Ministry of Agriculture and Forestry’s (MAF) latest discussion document lays out some changes involving the DIRA, as well as the Raw Milk Regulations. This covers Fonterra’s obligation to supply raw milk to its competitors at a regulated price.

“The Ministry has been grappling with these regulations for a number of years, especially given the recent surge in the number of independent processors. All of whom seem to want their 50 million litres of regulated raw milk from Fonterra.

“Because there is a regulatory cap on the total volume of milk available, the milk pail is starting to empty. That said, Government still seems keen to provide new start ups with enough milk to start production rolling.

“If Government wants new export entrants, then it needs to turn off the tap to those receiving milk at the regulated price. “Farmers didn’t create Fonterra to kill it off by a thousand competitive cuts.

“Farmers would be angry if there is no incentive on independent processors to build their own milk supply, or to make commercial arrangements to secure milk.

“Changes to the DIRA must be about creating real competitive tension for farmers’ milk,” Mr Leferink concluded.

ENDS

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