1 May 2012

Select Committee hears submissions from dairy industry

6:03 am on 1 May 2012

Fonterra's smaller competitors have focused on the price the company pays farmers for milk in their submissions on new dairy industry legislation.

Farmers and industry groups are having their say on proposed changes to the Dairy Industry Restructuring Act through Parliament's Primary Production Select Committee.

The Government has introduced the bill to put Fonterra's farmgate milk price-setting process under greater scrutiny and pave the way for share trading among farmers.

The Independent Dairy Processors group includes the second largest dairy company, Open Country Dairy, Maori-owned Miraka and Chinese-majority owned Synlait Milk.

Synlait chief executive John Penno has told the committee that the milk price component of Fonterra's payout is inflated by up to 50 cents a kilo of milk solids.

He says the legislation risks permanently locking that in thereby giving Fonterra a competitive advantage.

Pricing transparent - Fonterra

Fonterra, in its submission, has argued that its milk price setting mechanism is transparent.

It says it sees no need to increase scrutiny by embedding the process in legislation and having the milk price monitored by the Commerce Commission.

Fonterra says it supports most of the changes in the bill, but it has called for some amendments to ensure Trading Among Farmers can operate effectively.

It's seeking the removal of Section 109 (K), which chief financial officer Jonathan Mason says could cause confusion and clash with other regulations.