29 Mar 2012

Open Country eyes Fonterra pricing system

7:05 am on 29 March 2012

New Zealand's biggest independent milk processor says it supports Government moves to put Fonterra's price-setting process for raw milk under greater scrutiny.

But Open Country Dairy is questioning the effectiveness of having the Commerce Commission monitor the price if the system for calculating it remains unchanged.

The Dairy Industry Restructuring Amendment Bill, tabled in Parliament this week, will require Fonterra to publicly disclose how it sets the price it pays farmers.

The Commerce Commission will monitor the milk price and review it annually, but won't have the power to change it.

Open Country chairperson Laurie Margrain says his company still has issues with the formula Fonterra uses to set the farm gate price, because it's based on notional rather than actual market prices.

"The range that is permissible, acceptable, or under scrutiny ... looks very very significant," said Mr Margrain, whose company operates milk processing plants in Waikato, Bay of Plenty, Whanganui and Southland.

"I'm not sure that having such a range of possible outcomes, in accordance with those formulas is actually the right way to get certainty".