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

 

Fonterra to get veto rights on open entry requirement

By Paul McBeth

June 6 (BusinessDesk) - Primary Industries Minister Damien O'Connor will grant Fonterra Cooperative Group a little relief over its requirement to accept milk from all-comers, but it will also face greater oversight by the government.

Cabinet this week signed off on O'Connor's proposals to change the 18-year-old Dairy Industry Restructuring Act governing the sector, which will keep the open entry and exit provisions which Fonterra had been hoping to shed.

Instead, Fonterra will get a limited exception where it can reject an application to become a new shareholding farmer or turn down an existing application for an increased supply if they can't meet Fonterra's terms of supply, or if the farm's been converted to dairying.

"This would enable Fonterra to better manage uncertainty of future milk supply that may arise from dairy conversions, and the associated impacts on capacity and investment decisions," O'Connor said in his cabinet paper.

Those terms can relate to and allow different prices based on on-farm performance, including animal welfare, food safety, health and safety, employment conditions, environmental, climate change and other sustainability standards. O'Connor told Cabinet that the ability to offer different prices will let Fonterra encourage and reward excellent performance as part of its business and strategy.

"The government’s expectation that Fonterra and its farmers should fully utilise the flexibility afforded by the proposed exceptions to open entry, including to manage discharges and greenhouse gas emissions, will be clearly signalled through the explanatory note to the bill, Hansard, media statements and other influencing (rather than regulatory) tools," he said.

The changes will require new legislation, which will be included in this year's parliamentary programme.

Holding legislation to prevent the expiry of Fonterra's contestability and efficiency provisions was needed after independent processors collected 22 percent of all milk solids in 2015, triggering a review of the law.

The previous administration had planned to relax some of the conditions on Fonterra to accept milk supply from new dairy conversions and would phase out the need to sell regulated raw milk to large rival processors. Those proposals followed a Commerce Commission review that found Fonterra's market dominance still warranted regulation.

O'Connor's review of the governing legislation wanted to see whether the dairy sector is operating in the long-term interests of New Zealand consumers in terms of prices, availability, quality and product range.

MPI found the legislation largely provides a cheap and effective way of managing the risk of Fonterra behaving in a way that was against the long-term interests of New Zealand dairy farmers, consumers and the wider economy, and didn't directly interfere with Fonterra's strategies or investment plans.

O'Connor plans to limit Fonterra's ability to determine a key assumption in setting the base milk price, known as the asset beta.

He will also be able to nominate a member to Fonterra's milk price panel, although that wasn't taken to cabinet in the paper and regulatory impact assessments.

MPI did say external appointments to the panel were proposed in submissions but not considered.

"MPI considers that this would create issues of confidentiality and commercial sensitivity, potentially placing Fonterra at a competitive disadvantage," it said.

Independent processors with their own supply of 30 million litres or more in a single season will no longer be able ask Fonterra for additional regulated milk.

However, the proposals will raise Fonterra's obligatory sales volume of regulated milk to rival Goodman Fielder to 350 million litres per season from 250 million litre, albeit at a higher price.

(BusinessDesk)

ends

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Non-Giant Fossil Disoveries: Scientists Discover One Of World’s Oldest Bird Species

At 62 million-years-old, the newly-discovered Protodontopteryx ruthae, is one of the oldest named bird species in the world. It lived in New Zealand soon after the dinosaurs died out. More>>

Rural Employers Keen, Migrants Iffy: Employment Visa Changes Announced

“We are committed to ensuring that businesses are able to get the workers they need to fill critical skills shortages, while encouraging employers and regions to work together on long term workforce planning including supporting New Zealanders with the training they need to fill the gaps,” says Iain Lees-Galloway. More>>

ALSO:

Marsden Pipeline Rupture: Report Calls For Supply Improvements, Backs Digger Blame

The report makes several recommendations on how the sector can better prevent, prepare for, respond to, and recover from an incident. In particular, we consider it essential that government and industry work together to put in place and regularly practise sector-wide response plans, to improve the response to any future incident… More>>

ALSO:

Oil Scare: Trump Authorises Use Of Emergency Crude Stockpile

The New Zealand dollar fell against the US dollar after President Donald Trump authorised the use of the country's emergency crude stockpile after the weekend attack on Saudi Arabia’s major oil facilities. More>>

ALSO: