Changes to the Raw Milk Regulations announced

14 November 2012

Changes to the Raw Milk Regulations announced

The changes to the Raw Milk Regulations have finally been announced by the Minister for Primary Industries. These Regulations are part of the Dairy Industry Restructuring Act (DIRA).

“We are relieved that these Regulations are finally out”, says Willy Leferink, Federated Farmers Dairy Chairperson.

“It gives independent processors certainty over what their future looks like and the three year roll-out period gives them time to talk to more farmers about supplying them with milk. It also clears the way for new independent processors to come in as they know what they will be dealing with.

“What it won’t do, though, is get more independent processors lining up at the farmer’s gate, asking for their milk directly.

“We had hoped that a time limit would be put on all independent processors, whether they have their own farm supply or not. This would drive them to the farm gate asking farmers for milk, creating competition at the farm gate. We are disappointed that this is not the case.

“What has been announced will encourage a number of small firms who are only interested in taking safe, quality assured milk from Fonterra and repackaging it under their own brand labels.

“New Zealand origin labelling is hugely valuable to these people and we predict the number of firms coming in to do this, will only go up. It will take only ten independent processors taking their full allocation of 50 million litres to empty the Regulation’s bucket, given Goodman Fielder already has a guaranteed amount of 250 million litres.

“We know what will happen then, given the Minister is required to review the amount in the bucket every three years.

“It will also not encourage that pasture to bottle connection we need so much in New Zealand, connecting urban to rural.

“Having said that, there are a number of good things that have emerged.

“The amount of milk independent processors are allowed to take remains fixed at 50 million litres and is spread over the whole year in limited amounts. This takes into account the seasonal production curve and is also tied to the amount taken in October.

“Federated Farmers asked for this and so are pleased. It means that independent processors will find it difficult to ‘flat curve’ their supply, something very valuable to them, and may drive competition at the farm gate or even at the factory gate.
“And the certainty of pricing is good, where the Commerce Commission is overseeing the Fonterra farm gate milk price. The requirement for Fonterra to publish forecasts of this price quarterly will give small independent processors the ability to run their firms more securely.

“We are, however, disappointed that the Government has tipped even more milk into the Regulations.

“It has gone from being 600 million litres this season to 795 million litres for the 2013/14 season. While this is only 5 percent of Fonterra’s total milk take and the maximum allowed by DIRA, it is still seen by Federated Farmers as too much.

“However, all in all, we are really pleased that these Regulations have come out. Farmers can now put all this regulation stuff right at the back of the cupboard, given the DIRA was also amended this year.

“Farmers have spent the last year or two focusing on these two issues rather than on their own business or, in the case of Fonterra shareholders, on the co-op’s business. “It’s time to move on,” concluded Mr Leferink.

ENDS

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