Final report on statutory review of Fonterra's milk prices
Commission releases final report on statutory review of Fonterra’s 2014/15 Milk Price Manual
The Commerce Commission today released its final report on its statutory review of Fonterra’s Milk Price Manual (the Manual) for the 2014/15 dairy season. The Manual sets out the rules for how Fonterra will calculate the amount it will pay dairy farmers for raw milk this season. This is called the base milk price.
The Commission is required to report each dairy season on the extent to which the Manual promotes 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 first of two statutory reviews that the Commission is required to undertake each dairy season under the Dairy Industry Restructuring Act 2001 (DIRA).
“Our finding is unchanged from our draft decision in October, that the 2014/15 Manual is largely consistent with the purpose of the DIRA milk price monitoring regime,” said Dr Mark Berry, Commerce Commission Chairman.
“Fonterra has made a number of amendments to this season’s Manual that increase consistency with the overall purpose of the regime. These changes have been made in response to issues we raised last year,” said Dr Berry.
“However, some of those amendments introduce flexibility in the application of some aspects of the rules and there are still some unresolved issues. This means that we are unable to conclude on the extent to which four of the rules in the Manual are consistent with the regime’s purpose. We will have a further look at how Fonterra applies those rules in our review of the 2014/15 milk price calculation in 2015,” concluded Dr Berry.
Fonterra has provided clarification in response to some of the Commission’s concerns about this flexibility and has indicated that it will consider amending the 2015/16 Manual to address matters where further clarification is required.
The final report is available on the Commission’s website: http://www.comcom.govt.nz/statutory-review-of-milk-price-manual/201415-season/