25 Jan 2012

PM says changes to Fonterra legislation necessary

5:36 am on 25 January 2012

The Government is proposing changes to the way Fonterra sets its raw milk prices to make the process more transparent.

The proposals are the result of a Ministry of Agriculture review into the price the dairy cooperative pays for milk at the farm gate.

The review recommends embedding Fonterra's current milk price governance arrangements in legislation and requiring it to publicly disclose information about its price-setting.


Prime Minister John Key believes making Fonterra's raw milk pricing more transparent is important for New Zealand consumers and says the changes are necessary.

"These are genuine attempts by the Government to make sure that there's transparency when it come to raw milk pricing. I think that's very important.

"New Zealand consumers need to know that they are having milk priced at an accurate and transparent way - and so do other participants in the industry."

Primary Industries Minister David Carter told Checkpoint that Fonterra needs to take more time to understand the changes the Government is proposing.

Mr Carter believes the dairy cooperative will be better off.

"This is a very substantial consultation document. They need to take time now to read it so they fully understand it.

"In actual fact, what this does is bring about an end to Fonterra having to supply some of those big independents who have been taking raw milk the inception of DIRA (The Dairy Industry Restructuring Act) and Fonterra."

The proposed changes would also increase the total quantity of raw milk to be made available to independent processors from about 4% to 5% - a move Fonterra is not happy about.

Fonterra chairman Sir Henry van der Heyden says handing over more raw milk to increasingly foreign-owned dairy companies would cost the farmer-owned cooperative $200 million a year and see more profits go overseas.

Sir Henry believes the proposed changes are not necessary and told Checkpoint Fonterra's process to set raw milk prices is already very transparent.

"We put on the website the manual; it's a very detailed document, so we don't actually agree with that argument. People can always ask for more information, but from our perspective, we think the farm gate milk price is actually transparent."

The closing date for submissions on the proposed changes is 24 February.