One of the country's newest dairy companies has no sympathy for Fonterra having to supply competitors with milk, saying the dairy giant helped craft the rules.
Dairy Trust chief executive Mark Fankhauser said Fonterra negotiated and agreed to the terms of the Dairy Industry Restructuring Act in 2001 so it could effectively have a "legislated monopoly."
Under the Act, Fonterra is required to supply milk to existing and new processors at a price set by a formula which the dairy co-operative said cost it $14 million last season.
Fonterra this week said it wanted the Government to look at the pricing because of the advantage it gave to competing dairy processors and also because it benefited a growing number of overseas shareholders in those companies.
Mr Fankhauser said his company received no Fonterra milk, known as default milk, because of its shareholding in Open Country Cheese.
The Act states an inter-related company can get default milk only once.
But, that aside, Mr Fankhauser said Fonterra contributed to the Act's regulations.
"They wanted a favourable position which the Commerce Commission didn't want.
In the end they [Fonterra] took it to the Government and the Government over-ruled the Commerce Commission and these conditions were agreed to.
"Now they say it is not fair. I just think that is extraordinary behaviour."
Fonterra said it paid farmers a milk price of $7.53 per kg of milk solids last season, but received $7.24 a kg from the companies it supplied.
Mr Fankhauser said if Fonterra's added-value business was performing better, it would be paid more.
"The formula is designed to reflect the cost of milk less the share capital that farmers have tied up."
He believed the Act should be allowed to run its course, expected to take another three to four years.
The regulations were designed to control the industry until Fonterra faced sufficient competition, and Mr Fankhauser said while the Act was not perfect, it was as good as it could be.
He also reminded Fonterra that the Act gave it legislated access to regulated markets, and he would expect all aspects of the regulations to be open to debate, should Fonterra want to look at pricing.
"They're back-to-back issues. Things are not mutually exclusive."
Meanwhile, the New Zealand Stock Exchange (NZX) expects six dairy companies to list in the next three years.
NZX markets development manager Geoff Brown said investors wanted exposure to the dairy sector and the exchange was chasing such companies.
Westland Dairy Products and Tatua Co-op Dairy Company were both farmer-owned co-operatives, while New Zealand Farming Systems Uruguay was listed in the main board and Open Country Cheese, the subject of a takeover bid by Dairy Trust, was on the unlisted exchange.
Other new companies had tightly held local and foreign shareholding.
Synlait was owned by local investors, Mitsui Corporation and New Zealand Dairies by Russian company Nutritek and Dairy Trust was 25% owned by the Singapore Company Olam, although 35% was held by Affco and 17% by Talley Group.
Mataura Valley, which will start building a new plant near Gore later this year, also had a mix of local and foreign owners.
