28 Mar 2012

Carter says bill won't hamper dairy industry

9:09 am on 28 March 2012

Primary Industries Minister David Carter is defending criticism of proposed legislation regulating the dairy industry.

The legislation follows several inquiries into milk prices and is intended to update regulations governing dairy cooperative Fonterra as it prepares to issue shares to its farmer owners.


The Dairy Industry Restructuring Amendment Bill will oversee how Fonterra sets the price it pays its farmers.

The bill will require Fonterra to publicly disclose information on its milk price setting. The process will be monitored by the Commerce Commission, but it does not have the power to enforce change.

The bill also includes changes that will allow Fonterra to introduce share trading amongst its farmer shareholders.

David Carter told Radio New Zealand's Morning Report on Wednesday the bill will ensure a more transparent and efficient dairy market.

Mr Carter says the bill leaves the responsibility of setting the farmgate price with Fonterra. However, if the commission did find the price was too high, he believes it would put Fonterra under extreme pressure to change it.

If there was a substantial discrepancy between the commission's recommendations and Fonterra's farmgate price, then tighter controls could be considered.

Mr Carter says if he was the minister under those circumstances he would certainly look again at the way the price was established, as it has such a flow-on effect for everyone in the industry.

The minister says the bill is very light-handed regulation and will not hamstring the industry as some farmers fear.

But Rotorua dairy farmer Lachlan McKenzie believes the bill is misguided and will hobble Fonterra.

The former dairy spokesperson for Federated Farmers says no other company in New Zealand has the price it pays for its goods dictated by regulation, and the bill will put Fonterra at the beck and call of the Government and stifle commercial drivers.

Mr McKenzie says politicians have accused Fonterra and farmers of squeezing consumers, but the retail price is set by the international market.

The Labour Party's primary industries spokesperson says the proposed legislation must not be allowed to hamper Fonterra's ability to do business.

Damien O'Connor says there has been keen public interest in the retail price of milk as high international prices put pressure on the local market.

Mr O'Connor says scrutiny by the Commerce Commission could ensure a fair deal for consumers, but there is a long chain between the farm gate and supermarket shelves, and nothing should interfere with Fonterra's ability to compete internationally.

The MP says Labour will listen to farmers' concerns and look at the possible risks of share-trading before deciding whether to support the bill.

The bill was tabled in Parliament on Monday. David Carter says he expects it to have its first reading next week.

Milk price bill needs teeth - Consumer NZ

A consumer watchdog says the legislation has no teeth and will not curb retail milk prices.

Consumer New Zealand says the Commerce Commission should be given binding powers to control the farm gate price for milk.

Deputy chief executive David Naulls believes the bill is too much on Fonterra's terms and assumes the international prices set the local price.

Mr Naulls says he hopes MPs consider ways of uncoupling domestic prices from the global market so that milk becomes affordable for New Zealanders.

Any review of milk prices should also look at supermarkets which are mostly owned by Foodstuffs and Progressive, and price-gouging should be scrutinised, he says.