Consultation on NZ milk pricing and raw milk regulations

The New Zealand Government is encouraging submissions for its proposed response to reviews on milk pricing and raw milk regulations.

A set of preferred options has been put forward by the NZ Ministry of Agriculture and Forestry for amendments to the Dairy Industry Restructuring Act (DIRA) and the Raw Milk Regulations.

Primary Industries Minister David Carter said in a press release that the amendments will lead to transparency and efficiency in the NZ dairy market.

The DIRA saw the formation of Fonterra from three large NZ dairy bodies in 2001. Fonterra is now the largest dairy company in the country, collecting 96% of milk supplied by NZ dairy farmers. In order to ensure fair pricing is maintained, the government proposes that Fonterra’s current milk price governance be embedded in legislation.

The review recommends that Fonterra be obliged to publicly disclose information about the way it sets its milk price. An annual milk price monitoring scheme could also be part of the amendments.

A three-season limit for independent processors sourcing raw milk directly from farmers may apply under the revised Raw Milk Regulations. The seasonal nature of milk production may be acknowledged with maximum quantity limits that reflect the time of year, rather than a standard limit year-round.

The review also recommends that the total quantity of milk under the Raw Milk Regulations increase to 5% of Fonterra’s milk supply.

Fonterra has proposed a Trading Among Farmers (TAF) system that the government’s draft Bill will address. If the TAF is not successful or if Fonterra decides not to proceed with the TAF, the review’s recommendation is that Fonterra should be required to price its shares at “fair value”.

David Carter said, “These proposals aim to ensure that the DIRA and the Raw Milk Regulations remain a durable platform for the continuing growth of a competitive and innovative dairy sector.”

Submissions close 24 February 2012.