By Kent Atkinson
Chinese investors seeking to buy the Crafar family farms have separately sought up to 50 million litres of raw milk from Fonterra's farmers, which they will process at Tauranga for export to China as UHT long-life milk.
The Chinese company Natural Dairy (NZ) Holdings can become a dairy exporter even if its backers never buy a cow or a square metre of farmland.
It will be exporting 150 million packs of UHT milk, using Fonterra's milk and a Tauranga processor, said Natural Dairy (NZ) Holdings vice-chairman Graham Chin.
The Hong Kong-based company asked for the milk under provisions of the Dairy Industry Restructuring Act (DIRA) which entitles independent processors to each receive up to 50 million litres of raw milk.
A Fonterra spokesman, Alex Duncan, said tonight that this was "yet another example of why Fonterra believes that the way in which DIRA is applied, needs to be reviewed".
Fonterra farmers have been loudly complaining about a succession of companies backed by overseas money tapping "cheap" milk from their cows -- but today's announcement is expected to attract extra ire.
"We are required to supply our competitors with this milk, on a non-commercial basis," said Mr Duncan.
"They become reliant on it and use it to compete with us in offshore markets. It makes no commercial sense for Fonterra or New Zealand."
The Government has already signalled a law change to lift the price independent dairy processors have to pay for raw milk from Fonterra, by adding a premium of 10c/kg milksolids -- on top of the Fonterra farmgate milk price -- on such "statutory milk".
The allocation of up to 5 percent of Fonterra milk at cost price to provide a level playing field for smaller processors was written into enabling legislation for the cooperative a decade ago -- but its farmers have increasingly complained of having their "pockets picked" by upstart rivals.
A 2008 raw milk review said that for five of the past six seasons, independent processors had been able to access milk at a lower price than Fonterra paid its own farmers.
Fonterra controls about 95 percent of the nation's milk production, which is about 16 billion litres, with about 600 million litres going to rivals.
Access to raw milk under the DIRA was a key trade-off that farmers made to avoid Commerce Commission scrutiny of the mega-merger that set up their company. But Fonterra has fought in the courts and at the Commerce Commission over who should get the cheap milk, and at what price.
The Government is also planning for auctions of the milk when rising milkflow volumes trip a sunset clause to end Fonterra's obligations as early as 2013.
The nation's third-biggest milk processor, Goodman Fielder, receives 250 million litres of Fonterra milk -- because it has no farmers of its own -- and it is reported to be expecting 275 million litres in 2010-2011.
NZPA