June 25, 2019

New Zealand misses opportunity to better support local dairy farmers, Fonterra says


Fonterra acknowledged the outcome of New Zealand's review into the Dairy Industry Restructuring Act (DIRA) but has expressed concerns over the government's effort in supporting its dairy farmers, the dairy co-op announced in early June. 

Although the proposed changes announced by the government is expected to bring some improvements to the dairy sector, it also represents a missed opportunity to better support New Zealand, according to Fonterra.

Fonterra chairman John Monaghan said that, while the government has recommended tweaks to the rules under which Fonterra has to give its farmers' milk, effectively at cost price to foreign-backed competitors, the playing field is still tipped against New Zealand dairy farmers.

"Our farmer-owned co-operative wants an industry that promotes investment across regional New Zealand and where profits are kept in New Zealand.  We stand for an industry where New Zealand farmers are paid well for their milk and the unique attributes of our environment are protected and enhanced."

Monaghan added: "Given the significant increase in competition within the New Zealand dairy industry, we're disappointed the government did not recommend removing the requirement for us to supply our farmers' milk to large, export-focused businesses altogether."

Still, he commented that Fonterra welcomes "the government's decision to give Fonterra the right to refuse membership to our co-op where a farm is unlikely to comply with our terms of supply, or where the farm is a new conversion."

According to Monaghan, the recent changes will bolster Fonterra's ability to meet customers' demands and "continue leading the industry toward a sustainable future for our farmers and the rural communities in which they live and farm."

Fonterra supports greater pricing transparency across the industry and notes with interest the government's decision that the Minister of Agriculture will be able to nominate one person to sit on Fonterra's Milk Price Panel.

The co-op hopes the government will extend this practice of transparency and require all processors to publish the average price they pay to farmers, the key parameters of their milk price and examples showing the payout that would be received for different parameters.

"All efforts to bring greater pricing transparency into the dairy industry should be encouraged.  There's no downside in farmers having clear, consistent information from which to compare processors," Monaghan said.

"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."

- Fonterra