26 Jul 2011

Open Country not convinced by Fonterra milk price study

9:39 am on 26 July 2011

Open Country Dairy says an independent analysis commissioned by Fonterra has not resolved the issues it has with Fonterra's milk pricing system.

Fonterra is under attack from smaller competitors for its pricing arrangements, including what the charges for the milk it's obliged to supply them under the dairy regulations.

However Fonterra said last week it has independent verification that its pricing formula was fair.

The report was from international competition specialist Compass Lexecon, which was commissioned to analyse the competitive environment for dairy processing in New Zealand and review the way Fonterra calculates its farm gate milk price.

However, after reading the report, Open Country Dairy chairman Laurie Margrain says he's still not convinced, especially as the authors say they had limited information to work with and regard their report as a draft.

Mr Margrain also challenges a view that competition in the New Zealand dairy industry has grown. He says Fonterra still has 90% of the market and there is no competition at all in many parts of the country.

Open Country Dairy is the second biggest milk processor in the country.