3 Feb 2012

Minister says Fonterra won't lose its right to set milk price

7:11 pm on 3 February 2012

The Primary Industries Minister says the Government isn't planning to remove Fonterra's right to set the price it pays farmers for their milk.

The Government is currently reviewing the raw milk regulations which include price-setting mechanisms and the rules requiring Fonterra to supply milk to other processors.

It's planning to amend the Dairy Industry Restructuring Act, to cover any changes to those rules and to allow the co-operative to bring in a share trading plan for its farmer suppliers.

Farmers have raised concerns about recommendations in a Ministry of Agriculture policy document that the Government should have the final say through the Commerce Commission, in setting the milk price.

The draft regulatory impact statement, is not Government policy but is a preliminary discussion document.

And Minister David Carter says the Government isn't planning to remove Fonterra's right to decide the price, but the Commerce Commission will be able to monitor and comment on it.

He says it's critical the milk price is set accurately because that then affects the price that competitors must also pay to compete for milk at the farm gate.

Mr Carter says the Government proposes to allow Fonterra to have the full ability to set that farm gate milk price as they see fit.

But he says the Commerce Commission will be able to look at how Fonterra has established that price and to make some comment as to whether they think it is high, low or accurate.

Mr Carter says there needs to be a good deal more transparency around the establishment of that price than there has been in the past.

He says he's also been surprised at the strong reaction of Fonterra and its farmer shareholders to proposed changes in the milk regulations. They have objected to the proposal to increase the amount of milk that Fonterra is obliged to supply to its competitors.

Mr Carter says he believes that as more correct information becomes available to some of the farmers they are far more comfortable with what the Government is proposing with regard to milk regulations.

He says the Government always knew that the timetable to pass legislation to allow trading amongst farmers was going to be very tight.

But he says within that timetable there is additional consultation so people interested in what's being proposed for both trading amongst farmers and raw milk regulations have the opportunity to respond before 24 February.

The Government will then make final decisions at Cabinet and put legislation before Parliament next month.