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

 

UPDATE: Fonterra get veto rights on open entry requirement

UPDATE: Fonterra to get veto rights on open entry requirement

(Adds Fonterra comment in last 2 paragraphs)

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.

Fonterra noted the outcome, saying it welcomed the veto on the open entry requirements, but was disappointed it still has to supply milk to large, export-focused businesses.

"We look forward to constructively participating in the upcoming legislative process and will continue to push for an outcome that is in the interests of all dairy farmers and New Zealand," chair John Monaghan said in a statement.

(BusinessDesk)

ends

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Tiwai Point: Rio Tinto Announces Plans To Close Tiwai Point Smelter

Rio Tinto has just announced that it will wind down New Zealand Aluminium Smelters - the Tiwai Point smelter - saying the business is no longer viable. More>>

ALSO:

Freight: New Report On Auckland Port Relocation

The Government has released a major new report on the options for relocating the Port of Auckland’s freight operations while deferring any decision on the issue. More>>

ALSO:

Chartered Accountants: COVID-19 Fails To Knock Kiwi Investor Confidence, But More Disclosure Wanted

Three months of COVID-19 lockdown and investment turmoil has done little to knock confidence in New Zealand capital markets and listed companies with overall investor sentiment very similar to 2019, an investor survey held in mid June shows. However, ... More>>

ALSO:

Taxation: Black-Market Tobacco Sidesteps $287 Million In Excise Tax

Year-on-year increases in consumption of illicit tobacco in New Zealand have seen illegal trade swell to 11.5% of the total market. If consumed legally, illicit products would have netted the Government $287 million in excise tax during 2019. Independent ... More>>

ALSO:

Energy Sector: Meridian Spilled Water To Hike Electricity Prices - Authority Ruling

The Electricity Authority has found that generator Meridian Energy manipulated the power market, costing consumers about $80 million. More>>

ALSO:

XE Data Update: RBNZ Official Cash Rate Decision

The RBNZ will keep the Official Cash Rate (OCR) at 0.25%. T he key points in the RBNZ statement are: RBNZ keeps the OCR unchanged at 0.25% Maintain the LSAP (large scale asset purchase) at NZD$60 billion. Committee prepared to use additional monetary ... More>>

ALSO:

Electricity: Kiwis Ignore Promise Of Cheaper Power

Electric Kiwi and Flick Electric Co are joint winners of Canstar Blue’s award for Most Satisfied Customers | Electricity Providers From putting on an extra layer – rather than turning on a heater – to turning off lights and choosing the energy-saving ... More>>

ALSO:

Electricity: Transmission Pricing For A Low Carbon Future

The Electricity Authority has decided on new guidelines for transmission pricing. James Stevenson-Wallace, Chief Executive of the Electricity Authority says the new guidelines will deliver significant benefits to consumers, through lower electricity ... More>>

ALSO:

NIWA: The Climate Record That Keeps Getting Broken

Among the multitude of New Zealand climate statistics there is one record that continues to be broken month after month. Since January 2017 there has not been one month that recorded a below average nationwide temperature, according to NIWA’s seven station ... More>>

ALSO:

Govt: Extended Loan Scheme Keeps Business Afloat

Small businesses are getting greater certainty about access to finance with an extension to the interest-free cashflow loan scheme to the end of the year. The Small Business Cashflow Loan Scheme has already been extended once, to 24 July. Revenue and Small ... More>>

ALSO:

Science: 2019 Prime Minister’s Science Prizes Announced

The 2019 Prime Minister’s Science Prizes have been announced in a digital livestream event today. The Prizes recognise the impact of science on New Zealanders’ lives, celebrate the achievements of current scientists and encourage scientists of the ... More>>

ALSO:


RNZ: Fuel, Alcohol Costs To Go Up From Today

The increase today in the taxes on fuel, road user charges and alcohol is being called a tone-deaf move. More>>

ALSO:

Stardome Observatory: Young Kiwi Astro-Photographer Shoots For The Stars

Matariki by Josh Kirkley. The stars are aligning for up-and-coming Auckland-based astro-photographer Josh Kirkley (Kāi Tahu). During lockdown, one of his images was picked up by NASA and shared on the space agency’s Instagram to its 59.2 million ... More>>


DCANZ: Time For EU To Commit To A Level Playing Field For Trade

The Dairy Companies Association of New Zealand (DCANZ) has welcomed New Zealand Trade Minister David Parker’s statement that it is unacceptable for New Zealand exporters to continue facing an ‘unlevel playing field’ in the EU. Details leaked ... More>>

ALSO:

Potatoes New Zealand: Protecting NZ Fries As Part Of PNZ Pandemic Recovery & Transformation Plan

Potatoes New Zealand has met with Minister Faafoi this week to discuss investigating the potential importation of heavily discounted frozen potato chips into New Zealand. With MBIE’s support we are undertaking an investigation to gather evidence of the ... More>>

ALSO:


New Zealand Government: Supporting Kiwi Businesses To Resolve Rent Disputes

The Government will legislate to ensure businesses that suffered as a result of the COVID-19 response will get help to resolve disputes over commercial rent issues, Justice Minister Andrew Little announced today. More>>

ALSO: