Hon David Carter
Minister for Primary Industries

24 January 2012

Consultation on milk pricing, raw milk regulations

Consultation has opened on the Government’s proposed response to reviews of Fonterra’s farm gate milk price setting and the Raw Milk Regulations.

Primary Industries Minister David Carter says comprehensive work by the Ministry of Agriculture and Forestry, with input from economic, regulatory and legal experts, has resulted in a set of preferred options for amendments to the Dairy Industry Restructuring Act (DIRA) and the Raw Milk Regulations.

“These proposals aim to ensure that the DIRA and the Raw Milk Regulations remain a durable platform for the continuing growth of a competitive and innovative dairy sector,” says Mr Carter.

“Importantly, the amendments will result in a regulatory regime that promotes a more transparent and efficient dairy market.”

Mr Carter says the review of farm gate milk prices found that although Fonterra’s approach is consistent with that expected in a competitive market, lack of transparency remains an issue.

To strengthen confidence in Fonterra’s milk price setting process, the review recommends:

• embedding Fonterra’s current milk price governance arrangements in legislation
• requiring Fonterra to publicly disclose information about its milk price setting
• introducing an annual milk price monitoring regime to be undertaken by the Commerce Commission

The preferred option for the revised Raw Milk Regulations recommends:

• a three-season limit for independent processors who source raw milk directly from farmers
• an increase in the total quantity of milk available under the Raw Milk Regulations to approximately 5% of Fonterra’s milk supply, as currently allowed for in the DIRA
• a range of maximum quantity limits for independent processors accessing milk under the Raw Milk Regulations in different months to reflect the seasonal nature of milk production

Government consultation on these preferred options will be in the form of a draft Bill and a draft set of Regulations. The draft Bill also includes changes that enable Fonterra to move to its proposed Trading Among Farmers (TAF) system, should it choose to.

Should Fonterra not proceed with TAF, or if it is unsuccessful, the review recommends that Fonterra be required to price its shares at ‘fair value’.

“I encourage interested parties to take part in this important consultation process. The DIRA and the Raw Milk Regulations are what’s needed to ensure a fair and efficient dairy industry in New Zealand,” Mr Carter says.

Submissions close 24 February 2012. Further information, click here.

ENDS

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