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

 

CC releases final report on Fonterra’s Milk Price Manual


The Commerce Commission today released its final report on its annual review of Fonterra’s farm gate Milk Price Manual for the 2019/20 dairy season (Manual). The final report builds on our previous reviews of the Manual.

Deputy Chair Sue Begg said Fonterra’s 2019/20 Manual remains largely consistent with the purpose of the milk price monitoring regime under the Dairy Industry Restructuring Act.

“This year we have taken a look at the amendments to the Manual made by Fonterra and matters carried forward from our previous reviews. In our view Fonterra's amendments to defined terms in the Manual improve clarity or are minor corrections. However, we consider that clarification by Fonterra of some of the technical definitions for sales that are included in the farm gate milk price calculation would better promote the purpose of the Act," Ms Begg said.

The Commission will review how Fonterra applies the Manual when it assesses the 2019/20 base milk price calculation at the end of the current dairy season.

Background
The Commission’s review
Each year the Commerce Commission reviews Fonterra’s Manual for the dairy season that has just started. The Manual sets out Fonterra’s methodology for calculating its base milk price (also known as the farm gate milk price) for the season using a notional processor construct. It does not cover any other milk price within the milk supply chain.

We are required to review Fonterra’s Milk Price Manual (Manual review) at the beginning of each dairy season under the milk price monitoring regime in the Dairy Industry Restructuring Act (DIRA). Consistent with the purpose of the milk price monitoring regime, our review focuses on the extent to which the Manual provides:
• an incentive for Fonterra to operate efficiently (the ‘efficiency dimension’)
• for contestability in the market for the purchase of milk from farmers (the ‘contestability dimension’).
This season the Commission has looked at the amendments to the Manual made by Fonterra and matters carried forward from our previous reviews. Matters carried forward include farmer support costs, actual foreign exchange rates, capacity of standard plants, materiality and qualifying outlier sales.

Purpose of the milk price monitoring regime
The milk price monitoring regime is intended to promote greater confidence in the consistency of Fonterra’s base milk price with contestable market outcomes.

The regime exists because, without a competitive market for the purchase of farmers’ milk, the milk price is set by Fonterra using an ‘administrative’ methodology. As Fonterra determines and applies that methodology itself, there is a risk that Fonterra might have the incentive and ability to set a base milk price that is ‘inefficient’.

The regime also monitors whether the price Fonterra sets might be ‘too high’ or ‘too low’ relative to the price that would exist if the market for purchasing farmers’ milk was contestable.

DIRA review requirements
DIRA requires the Commission to conduct two separate reviews of Fonterra’s base milk price setting each dairy season.

Fonterra’s Manual sets out its methodology for calculating its base milk price for the season using a notional processor construct. As well as the review of Fonterra’s Manual, the Commission is also required to review the base milk price calculation (calculation review).

We published our report on the 2018/19 Review of the base milk price calculation in September 2019.

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

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:

Economy: COVID-19 Contributes To 1.6 Percent Fall In March Quarter GDP

Gross domestic product (GDP) fell 1.6 percent in the March 2020 quarter, the largest drop in 29 years, as the initial effects of COVID-19 restrictions impacted on economic activity, Stats NZ said today. This quarter’s GDP results showed a widespread drop ... 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:

ASB: Investor Confidence Falls To Four-Year Low

As the world grapples with the fallout from the most significant pandemic the world has seen in a century, economic concerns are weighing on investors, dragging investor confidence down to a four-year low in the first quarter of the year. For the three ... More>>

ALSO:

Science Media Centre: Funding For R&D In New Zealand – Expert Reaction

Research, Science and Innovation Minister Dr Megan Woods has today announced $401.3 million funding for research and development through Budget 2020 and the COVID Response and Recovery Fund. The fund includes $150 million for an R&D loan scheme, ... 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:


Science Media Centre: Understanding 5G Concerns – Expert Q&A


Recent attacks on cell phone towers have brought concerns over the rollout of 5G technology into sharp relief.
While scientific research has consistently shown that the technology does not adversely affect human health, public concerns about its impact have spread around the world, fueled in part by growing misinformation online. The SMC asked experts to comment... More>>

ALSO:


Trade: Record Monthly Surplus As Imports Dive

Imports in April 2020 had their biggest fall since October 2009, resulting in a monthly trade surplus of $1.3 billion, Stats NZ said today. “This is the largest monthly trade surplus on record and the annual goods trade deficit is the lowest ... More>>

ALSO: