Fonterra backs new dairy bill

Fonterra has given its blessing to a proposed law change that will increase transparency in the dairy industry, but has maintained that new rules for monitoring milk price setting are unnecessary.

Chairman Sir Henry van der Heyden appeared today before Parliament's primary production committee, which was hearing submissions on the Dairy Industry Restructuring Amendment Bill, and said his organisation broadly supported the legislation.

The bill would enable Fonterra to move to its proposed trading among farmers (TAF) system _ a market for trading by farmers in new co-op shares. It also establishes a milk price panel to supervise the setting of the base milk price, and gives the Commerce Commission powers to oversee the price setting.

Sir Henry did note several concerns with the legislation, particularly around the increased supervision of milk price setting.

"We don't think milk price oversight is necessary, but what we're saying is that we can live in that space,'' he said.

"From our perspective, we've always had a very transparent, robust process in setting the milk price, so we don't think we need to go any further.''

The Fonterra Shareholders Council took a stronger position on the milk price oversight, with chairman Simon Couper telling the committee the proposed regime was a key concern.

Mr Couper said an inter-departmental review, as well as inquiries by the Commerce Commission and Parliament's Commerce Committee had confirmed the appropriateness of the current price setting processes.

"There has always been an incentive to set an efficient milk price as this is a key economic driver of our industry ... we have a track record of arriving at a correct milk price which has been proven by three reviews,'' he said.

"We believe the Government's policy objectives would be best served by allowing this process to continue to operate without statutory intrusion.''

If the Government was determined to have such a regime, Mr Couper said the panel should not be put into legislation.

Both Fonterra management and the council applauded the provisions that would allow TAF to go ahead, with Sir Henry saying that it was crucial to enabling the company to remain "the national champion for farmer shareholders''.

Shareholders would have the final say on whether to go ahead with TAF in a vote on June 25.

Federated Farmers dairy group vice chairman Andrew Hoggard, also a Fonterra shareholder, focused on the importance of getting the milk price right.

"If you're going to take one point away from our submission, it's around milk price,'' he said.

"As a farmer the base milk price is very important to me, it sets the income for the farm, it drives what happens on the farm, it determines how I look at investments ... it's vitally important we get that right.''

Mr Hoggard said the tension around the issue affected not just the industry, but consumers as well, and it was essential a fair price was in place.

 

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