The Government has announced a shake-up in the way the dairy industry is regulated in order to foster more competition. But Labour has described the move as giving in to foreign investors and big business.
“It’s a big deal but the devil will be in the detail,” Federated Farmers Waikato president Chris Lewis said.
Primary Industries Minister Nathan Guy’s decisions follow a recent review of the Dairy Industry Restructuring Act (DIRA) by the Commerce Commission. The recommendations will now be drafted into an amendment bill which will be considered by the Primary Production Select Committee early next year.
Goodman Fielder welcomed the announcement. An earlier proposal had been a possible cut to the company’s entitlement to raw milk for its processing operations.
“Today’s announcement is an important step in ensuring Kiwi consumers continue to get competitive prices and choice,” said Tim Deane, managing director of Goodman Fielder in New Zealand.
“These regulations were first introduced in 2001 when Fonterra was created to ensure there was sufficient competition in the New Zealand market for raw milk.
“This is still relevant today. These regulations ensure there is viable competition in the market which is good news for Kiwi consumers because it helps keep NZ dairy prices competitive and ensures there is a wider choice of products and brands on the market.”
Key points of the changes are:
* Prevent the efficiency and contestability provisions of DIRA from expiring in the South Island, and require that the next review of the state of competition in the New Zealand dairy industry commence during the 2020-21 dairy season (20 years since DIRA began);
* Enable ongoing monitoring of dairy markets;
* Allow Fonterra discretion to accept applications to become shareholders from new dairy conversions from 2018-19;
*Alter who is eligible for regulated milk from Fonterra, and the terms that it is available on.
Fonterra will no longer be required to sell regulated milk to large, export-focused processors from the start of the 2019-20 season. All processors purchasing regulated milk will have reduced flexibility in forecasting the volume of regulated milk they intend to purchase from Fonterra from the start of the 2018-19 season.
However, the Government said it was deferring the changes to regulated milk for not only Goodman Fielder but also small or domestically focused processors.
Labour’s Primary Industries spokesman Damien O’Connor said the Government had given into foreign investors and big business with the provision that Fonterra was obliged to take milk from suppliers.
“What that means is that a foreign company can solicit milk from a farmer, but then if the arrangement turns to custard, Fonterra has to accept the farmer back again,” O’Connor said.
The decision to continue to allow Goodman Fielder its privileged position was a “sop to big business”.
Lewis said one of the talking points would be giving Fonterra discretion over whether it accepted milk from new conversions.
“It depends on the definition of conversion. For example, if I buy 10 hectares next door which isn’t a dairy farm and convert it into part of my dairy operation, is that a conversion?” Lewis asked.
By: Gerard Hutching