Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Com Com Report on Review of Fonterra Milk Price Manual

Commerce Commission releases draft report on statutory review of Fonterra’s 2013/14 Milk Price Manual

Issued 15 October 2013, Release No. 29

The Commerce Commission has today released a draft report on its statutory review of Fonterra’s Milk Price Manual (Manual) for the 2013/14 dairy season. The Manual sets out the methodology for calculating the farm gate (base) milk price, which is the price paid by Fonterra to dairy farmers for raw milk they supply to Fonterra.

This is the first of two statutory reviews that the Commission is required to undertake each dairy season under the Dairy Industry Restructuring Act 2001 (DIRA).

DIRA requires the Commission to report on the extent to which Fonterra’s Manual is consistent with the purpose of the milk price monitoring regime. The purpose of the regime is to promote the setting of a base milk price that provides incentives for Fonterra to operate efficiently, while providing for contestability in the market for the purchase of milk from farmers.

“This is the second time we have reviewed the Milk Price Manual. Our current view is that, to the extent we are able to assess it, the Manual for the 2013/14 dairy season is largely consistent with the purpose of the DIRA milk monitoring regime” said Sue Begg, Commerce Commission Deputy Chair.

“However, the changes made to the Manual since our last review, and our increased understanding of how the Manual is currently applied, have raised for us a general concern about the lack of prescription in some rules of the Manual” she said. 

Due to this lack of prescription the Commission has been unable to conclude on the extent to which two rules in the Manual for the 2013/14 dairy season are consistent with the contestability objective of the legislative purpose.

“The lack of prescription undermines transparency, which is important to the efficiency objective. It also means that we will need to consider the specific application of these rules before we can conclude on the extent to which they provide for contestability. This will form part of our second statutory review for 2013/14, which we will undertake at the end of the season,” said Ms Begg.

The Commission’s review has also found one issue from its previous reviews, regarding the treatment of stranded assets, has not been addressed by Fonterra in the 2013/14 Manual.

The Commission is seeking comments from interested parties on the draft report by 5pm on Friday 15 November 2013. After considering all comments, the Commission will finalise its conclusions and publish the final report by 16 December 2013.

You can find the draft report on the Commission’s website: http://www.comcom.govt.nz/statutory-review-of-milk-price-manual/201314-season/

Background

Under section 150H of DIRA, the Commission must undertake two separate reviews of Fonterra’s base milk price setting in each dairy season:

• Review of Fonterra’s Milk Price Manual (review of the Manual), which sets out the methodology for calculating the base milk price for the season.
• Review of Fonterra’s base milk price calculation (review of the base milk price calculation).

This draft report relates to the review of the Manual. Section 150I of DIRA requires us to report on the extent to which the Manual is consistent with the purpose of Subpart 5A (s 150A) of DIRA. Section 150A of DIRA specifies that the purpose of the milk price monitoring regime is to promote the setting of the base milk price by Fonterra:

• that provides an incentive for Fonterra to operate efficiently, while
• providing for contestability in the market for the purchase of milk from farmers.

The Commission is required to make its final report on the review of the Manual by 15 December in each year. In 2013, 15 December falls on a Sunday. Consistent with s 35(6) of the Interpretation Act 1999, we will publish our final report no later than the following business day, which is Monday 16 December 2013.

ENDS


© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Power Outages, Roads Close: Easter Storm Moving Down Country

The NZ Transport Agency says storm conditions at the start of the Easter break are making driving hazardous in Auckland and Northland and it advises people extreme care is needed on the regions’ state highways and roads... More>>

ALSO:

Houses (& Tobacco) Lead Inflation: CPI Up 0.3% In March Quarter

The consumers price index (CPI) rose 0.3 percent in the March 2014 quarter, Statistics New Zealand said today. Higher tobacco and housing prices were partly countered by seasonally cheaper international air fares, vegetables, and package holidays. More>>

ALSO:

Notoriously Reliable Predictions: Budget To Show Rise In Full-Time Income To 2018: English

This year’s Budget will forecast wage increases through to 2018 amounting to a $10,500 a year increase in average full time earnings over six years to $62,200 a year, says Finance Minister Bill English in a speech urging voters not to “put all of this at risk” by changing the government. More>>

ALSO:

Prices Up, Volume Down: March NZ House Sales Drop 10% As Loan Curbs Bite

New Zealand house sales dropped 10 percent in March from a year earlier as the Reserve Bank’s restrictions on low-equity mortgages continue to weigh on sales of cheaper property. More>>

ALSO:

Scoop Business: Chorus To Appeal Copper Pricing Judgment

Chorus will appeal a High Court ruling upholding the Commerce Commission’s determination setting the regulated prices on the telecommunications network operator’s copper lines. More>>

ALSO:

Earlier:

Cars: Precautionary Recalls Announced For Toyota Vehicles

Toyota advises that a number of its New Zealand vehicles are affected by a series of precautionary global recalls. Toyota New Zealand General Manager Customer Services Spencer Morris stressed that the recalls are precautionary. More>>

ALSO:

'Gardening Club': Air Freight Cartel Nets Almost $12 Million In Penalties

The High Court in Auckland has today ordered Swiss company Kuehne + Nagel International AG to pay a penalty of $3.1 million plus costs for breaches of the Commerce Act. Kuehne + Nagel’s penalty brings the total penalties ordered in this case to $11.95 million ... More>>

ALSO:

Crown Accounts: Revenue Below Projections

Core Crown tax revenue has increased by $1.9 billion (or 5.0%) compared to the same time last year. However this was $1.1 billion less than expected and is reflected across most tax types, continuing the pattern of recent months. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news