Proposed Bill to Encourage Trading Among Farmers

NEW ZEALAND - A new bill detailing proposals to oversee Fonterra’s farm gate milk price setting and ensure a more transparent and efficient dairy market was tabled in Parliament this week by Primary Industries Minister David Carter.

28 March 2012

2 minute read

Oceania

“Because of Fonterra’s dominance in the New Zealand market, the price it pays its farmers for milk at the farm gate effectively becomes the default price that all dairy processors must pay to attract supply from farmers,” said Mr Carter.

“The Dairy Industry Restructuring Amendment Bill will oversee how Fonterra sets the price it pays its farmers, thereby ensuring a competitive and innovative dairy industry.

“The proposed regime will give confidence that the aim of the Dairy Industry Restructuring Act – to drive efficiency in the dairy industry through contestable milk supply – is being met.”

Mr Carter said the Bill will primarily embed Fonterra’s current milk price governance arrangements in legislation, require Fonterra to publicly disclose information on its milk price setting and introduce an annual milk price monitoring regime to be undertaken by the Commerce Commission.

The Bill also includes changes that enable Fonterra to move to its proposed Trading Among Farmers (TAF) system, should it choose to.

Fonterra Co-operative Group Limited has welcomed the introduction of a Bill that will help pave the way for the introduction of Trading Among Farmers (TAF).

Fonterra Chairman Sir Henry van der Heyden said some technical changes sought by the Co-op had been made.

"It's nearly there " but there are some further refinements we will discuss with Government and other party members during the select committee process. We want to ensure the law changes allow TAF to operate effectively after its scheduled November 2012 launch.

"But the Board and Shareholders" Council still have to complete their due diligence process and ensure that the pre-conditions on which farmers voted can all be met "including 100 per cent farmer control and ownership."

The Amendment Bill also provides for the Commerce Commission to review and report on Fonterra's farm gate milk price setting.

"The Co-op will always set the Milk Price. We have said right from the start that we don't think this proposed oversight is necessary " but we can live with it," said Sir Henry. "Fonterra supports transparency around our Farmgate Milk Price and we have made public our Farmgate Milk Price Manual and more detailed analysis every year in our Milk Price Statement."

"It's been a good process and the Government has given the Co-op and our farmers ample opportunity to make our position clear, particularly on the Raw Milk Regulations."

Mr Carter said potential changes to the Raw Milk Regulations are still being considered and an announcement on these is expected shortly.