11 Aug 2010

Dairy company supports milk supply move

1:33 pm on 11 August 2010

An independent dairy processor and exporter is supporting the Government's decision to extend the regulations that require Fonterra to supply a set amount of milk each year to its smaller competitors.

Under the Dairy Industry Restructuring Act, Fonterra would no longer have been required to provide that milk once its total share of the national milk supply dropped below about 90%.

That trigger was due to be reached in both the North and South Islands over the next year or so.

The Government has lowered the trigger to 80%, effectively extending the regulatory requirement on Fonterra by some years.

Fonterra isn't happy with that, but Laurie Margrain, the chair of Open Country Dairy, which still gets up to 6% of its milk from Fonterra, says the decision is reassuring.

He says, however, that independent processors are less comfortable with the other part of last week's Government announcement, that it will also be reviewing the conditions that decide who has access to Fonterra's milk.

In particular, he says, the suggestion that milk supply might be restricted to independent processors with overseas-based shareholders is unwelcome.