July 19, 2011

Fonterra's milk sales rules scrutinised

The New Zealand government has thrown open for public discussion the issue of who should be able to access raw milk from dairy giant Fonterra at a regulated price.

Agriculture Minister David Carter said his ministry was conducting public consultation on the rules by which independent milk processors can require Fonterra to sell them raw milk up to a set volume at a set price every year.

Fonterra, which controls 90% of the country's raw milk supply, is currently obliged to make up to 50 million litres of regulated milk available to each processor a year, under industry law designed to rein in its market power and promote competition. 

The annual total volume Fonterra is currently required to provide is 600 million litres.

The farmer-owned co-operative, now in its 10th year, has increasingly resisted the obligation on the grounds that several of the independent processors such as Open Country and Synlait have large foreign ownership and the profits they make out of New Zealand farmers' milk goes overseas.

The Government last year agreed to review the raw milk regulations, part of the industry's over-arching Dairy Restructuring Act 2001.

The review will cover such issues as how much regulated milk independent processors should have access to, and for how long; and the total volume of regulated milk that should be made available each year.

It does not cover the farm gate milk price, or the design of a regulatory regime around Fonterra's share trading among farmers proposal, issues which are being examined separately.