Process begins for review of Fonterra’s milk price

Commission begins process for the 2013/14 review of Fonterra’s milk price calculation

The Commerce Commission today released a paper outlining the proposed process and timeline for a review of Fonterra’s base milk price calculation for the 2013/14 dairy season. The base milk price is what Fonterra pays the farmers who supply them milk.

The Commission is required to review Fonterra’s calculation of the base milk price each year and 2013/14 is the second time the Commission will undertake a calculation review. The review will assess the extent to which Fonterra’s approach provides incentives for it to operate efficiently while providing for contestability in the market for purchasing farmers’ milk. The scope of the review is to only look at the base milk price, not the retail price that consumers pay for milk.

The Commission is proposing to build on last year’s review by focusing its analysis this year on the issues outstanding from previous reviews and any areas where Fonterra has changed its approach.

“The big change for this year’s review is that Fonterra is proposing to pay less than the milk price calculated under the 2013/14 Milk Price Manual,” said Commerce Commission Deputy Chair Sue Begg.

“Our assessment approach may differ from last year as a result, but we haven’t formed any view yet. We will reach a view once Fonterra provides us with its statutory information on 1 July 2014 and we will also seek the views of interested parties at that time,” said Ms Begg.

The Commission welcomes comments on the process outlined in the paper by Friday 20 June 2014. The draft report will be issued by 15 August 2014, with the final report expected by 15 September 2014.

The process paper can be found on the Commission’s website at: www.comcom.govt.nz/review-of-milk-price-manual-201415-season

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